RWE AG
Annual Report 2020

Plain-text annual report

Powering ahead. Annual Report 2020 rwe.com Our energy for a sustainable life. For more than 120 years, our product has always been the same: electricity. What has changed is how we produce it. We generated our very first megawatt hour in 1900 – from hard coal. Later, lignite and nuclear fuel rods were our major energy sources. Today, they have been replaced in this role with natural gas, wind, sun and water. Tomorrow, we will make a full transition to zero-carbon energy sources. Because our objective is carbon-neutral power generation. And we aim to accomplish this by 2040. Therefore, every year we are investing billions in the expansion of renewable energy. Green energy is the lifeblood of a carbon-neutral economy. And it is in rising demand also outside of the energy sector. Be it in industry, transport or buildings, fossil fuels such as oil and natural gas must be replaced by zero-carbon energy sources everywhere. And where it is not possible to switch to green electricity directly, for example in steel production, hydrogen is a suitable alternative – that is hydrogen produced using electricity from renewables. Which we believe also presents us with an opportunity. Together with renowned partners from industry and science, we have set our sights on a hydrogen economy. We have already launched more than 30 projects. Our long-term goal is to supply both green electricity and green hydrogen, a second product with huge potential demand. Opening a new chapter also means closing an old one. Last year, we shut down our last two German hard coal-fired power stations. In doing so, we ended what started our business in 1900. In 2020, we also closed our last hard coal power plant in the United Kingdom. Now we are also exiting the German lignite business – in a socially acceptable manner and without jeopardising security of supply. Why are we doing all of this? Because as a world leading power provider, we shoulder a unique responsibility for implementing the Paris Climate Agreement. Our purpose “Our energy for a sustainable life” expresses that this responsibility is what drives us and shapes our entrepreneurial actions. We want to play our part in the joint effort to limit the global rise in temperature to far below two degrees Celsius compared to the pre-industrial era. Our accomplishments demonstrate how seriously we are taking this: since 2012, we have reduced our annual carbon dioxide emissions by 62 percent. Based on a review by the independent Science Based Targets Initiative, our emission reduction strategy is in line with the Paris climate target. This is scientific proof that we are on the right path. Our path leads to a sustainable, carbon-neutral energy world. Come join us! 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information At a glance RWE Group – key figures Power generation External revenue (excluding natural gas tax / electricity tax) Adjusted EBITDA Adjusted EBIT Income from continuing operations before tax Net income Adjusted net income Cash flows from operating activities of continuing operations Capital expenditure1 Property, plant and equipment and intangible assets Financial assets Free cash flow 2020 2019 GWh 146,775 153,165 € million € million € million € million € million € million € million € million € million € million € million 13,688 13,125 3,235 1,771 1,196 995 1,213 4,125 3,358 2,285 1,073 1,132 2,489 1,267 – 752 8,498 – – 977 1,771 1,767 4 – 2,053 Number of shares outstanding (annual average) thousands 637,286 614,745 Earnings per share Adjusted net income per share Dividend per share € € € 1.56 1.90 0.852 13.82 – 0.80 +/– – 6,390 563 746 504 1,948 – 7,503 – 5,102 1,587 518 1,069 3,185 22,541 – 12.26 – 0.05 Net debt of continuing operations3 € million Workforce4 31 Dec 2020 31 Dec 2019 4,432 19,498 6,927 19,792 – 2,495 – 294 1 Only cash investments; prior-year figures restated accordingly. 2 Dividend proposal for fiscal 2020, subject to the passing of a resolution by the 28 April 2021 Annual General Meeting. 3 New definition and restated prior-year figure; see commentary on page 62. 4 Converted to full-time positions. 3 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Contents 1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 To our investors Interview with the CEO The Executive Board of RWE AG Supervisory Board report RWE on the capital market Combined review of operations Strategy Innovation Business environment 2.4 Major events 2.5 2.6 Business performance Financial position and net worth 2.7 Notes to the financial statements of RWE AG (holding company) 2.8 Outlook 2.9 Development of risks and opportunities 2.10 Disclosure relating to German takeover law 2.11 Remuneration report 5 6 9 11 18 21 22 29 34 42 47 59 64 66 69 79 82 3 Responsibility statement 4 4.1 4.2 4.3 4.4 4.5 Consolidated financial statements Income statement Statement of comprehensive income Balance sheet Cash flow statement Statement of changes in equity 4.6 Notes 4.7 4.8 4.9 List of shareholdings (part of the notes) Boards (part of the notes) Independent auditor‘s report 4.10 Information on the auditor 5 5.1 5.2 5.3 Further information Five-year overview Imprint Financial calendar 97 99 100 101 102 104 106 107 192 226 233 241 242 243 244 245 We provide detailed information on our sustainability activities in our Sustainability Report and Non-Financial Report. These publications are available at www.rwe.com/en/responsibility-and-sustainability. The reports on fiscal 2020 will be published in April 2021. 4 RWE Annual Report 2020 01 To our investors Interview with the CEO 1.1 1.2 The Executive Board of RWE AG 1.3 Supervisory Board report 1.4 RWE on the capital market 6 9 11 18 Kårehamn Offshore wind farm in the Baltic Sea, Sweden l photo by Tristan Stedman 1 To our investors Interview with the CEO 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Interview with the CEO “Drawing on our skills, we can hold our own against anyone.” Rolf Martin Schmitz on the goals and accomplishments in the past fiscal year, new Mr. Schmitz, 2020 was an unusual year in many ways. If you had to put it in nutshell from competitors in the expansion of wind energy, more flexible ways of working since the RWE’s perspective, what would you say? onset of the pandemic, and the upside to his retirement. I think “accomplished more than planned despite corona” sums it up pretty well. We started the year with specific goals in mind. We wanted to complete the asset swap with E.ON, integrate our new colleagues into our organisation, and implement our plan for expanding renewable energy. We succeeded on all counts. In addition, we wanted to wrap up the contractual framework for the German coal phaseout while safeguarding both our interests as a company and those of our employees. We accomplished this too. But some issues were not on our to-do list at the beginning of the year ... ... for example, the acquisition of the European development business of wind turbine manufacturer Nordex and the capital increase in August ... ... transactions enabling us to substantially accelerate the expansion of renewable energy. Furthermore, at the beginning of the year, I didn't expect us to have made such a fast exit from hard coal-fired generation in Germany. And the list should also include the fact that we surpassed our earnings forecast for 2020. All this was accomplished under the unprecedented circumstances sparked by the global pandemic, which fortunately only had a minor impact on our business. A newspaper wrote that only a handful of managers have transformed their company as thoroughly as you have done. Do you agree? That is up to others to decide. Yes, we did initiate an extensive transformation process. But, to me, this isn’t anything but the logical continuation of a company’s evolution. Our main product, electricity, hasn’t changed. By using renewable energy, we have merely opted for a new way of producing it. 6 RWE Annual Report 20201 To our investors Interview with the CEO 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Well, the capital market is certainly very supportive of RWE’s development, as demonstrated The auction is a prime example of the fact that we can. We secured the right to develop for years by the company’s above-average share performance. Recently, renewable energy 3,000 megawatts of generation capacity. Bids for nearly 8,000 megawatts were invited. has almost been hyped up. And the situation with hydrogen is similar. Doesn’t this harbour a And we are paying the lowest annual fee per megawatt among all successful bidders. potential danger? This means that we applied an intelligent bidding strategy. Now we must demonstrate that we can develop the sites quickly and successfully. And that we can build and operate First and foremost, the development of our share price proves that the capital market state-of-the-art wind farms cost-effectively. In a nutshell, we have to prove our operational endorses our strategy. Almost daily, the media reports on governments setting ambitious and technological skills. Then we can hold our own against anyone. climate targets and seeking to expand renewable energy. And of course, sectors such as transport and heating must be electrified at least to some degree and hydrogen is the ideal You mentioned technological expertise as a competitive advantage. Would you define RWE fuel when it comes to making those parts of the economy that cannnot transition to green as a tech company? electricity. So I don't see why anyone would speak of a hype. To me, this is the logical path to carbon neutrality. When I started my career in Germany's energy industry 35 years ago, utilities like RWE were tech companies. Back then, power plant construction still harboured a lot of potential for But aren’t you wary of more and more competitors entering the market to get in on the new technology. This was followed by a phase during which the focus shifted from new action? Some major oil companies have already announced aggressive growth targets in builds to the commercial optimisation of existing stations. Now we are seeing a return to relation to renewable energy? considerable investments in generation capacity. This increases demand for technical solutions. One example of this is the numerous initiatives for developing floating platforms If politicians are being serious about protecting the climate, which I don’t doubt, then we will for offshore wind farms. We’re also active in this area, as we’re involved in several projects. have an enormous renewable energy market with enough room for both established players We know that floating foundations will multiply the potential utilisation of offshore wind and new entrants. Take the United Kingdom for example, which aims to quadruple its power and that we have to be on board for such new developments early on. offshore wind capacity to 40 gigawatts by 2030. Germany plans to triple its capacity to 20 gigawatts during the same period, and Poland has hit the ground running in the offshore Let’s talk about the integration of the renewables business in the RWE Group. Have the wind business. There may be a danger of newcomers initially placing aggressive bids in wind 4,000-plus former employees of E.ON and innogy, who work for RWE now, settled into the power auctions, running the risk of projects being unprofitable. However, such irrational ‘new world’? strategies are not sustainable. Shareholders of these companies will definitely not look on idly if management repeatedly pours money down the drain. I have the impression that most of them have been well integrated and feel at home. But it goes without saying that an integration of this scale takes more than a year to complete. It became apparent that competition is increasing at the auction for seabed lease I know from experience that it takes at least twice as long. Moreover, it isn’t only important agreements in the United Kingdom in early 2021. In addition to RWE, BP and Total also for our new colleagues to feel comfortable, but also for those who were in the organisation won contracts. Can RWE survive in the long run in the face of competitors with such before they arrived. It’s very important to me that our coworkers in the lignite and nuclear financial clout? business of the 'old world' be treated with respect. Having said that, I’ve only heard good things on this front. 7 RWE Annual Report 20201 To our investors Interview with the CEO 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Wasn’t the coronavirus pandemic an obstacle to the integration? It must have been difficult wasn't the only objective. By participating in the state shutdown auctions, we were able to for many to get to know their new colleagues while working from home. secure a modest, but not insignificant, compensation, which we will use to make growth In-person encounters are indeed very important, especially if two people don't know each investments. other. So of course, COVID-19 made it more difficult for the teams to become cohesive. 2020 was a strong fiscal year for RWE. Will 2021 be equally as good? However, as strange as this may sound, the restrictions have also been beneficial in some ways. Instead of spending endless hours on business travel, meetings took place online. All As far as the operating result is concerned, probably not. Unfortunately, in February there of a sudden, physical distance was irrelevant. This often led to more thorough discussions, were massive supply shortages in Texas as the state experienced the worst cold snap in a especially when working across borders. The pandemic has changed the way we work. century. Plant outages and regulatory intervention forced us to purchase electricity at And we’ve realised that everything still works despite this. We should maintain this flexibility absurd prices. This reduced our earnings considerably. Nevertheless, 2021 should also be after COVID-19. a satisfying year for RWE. It is important that we continue our course for growth in the renewable energy business with determination and achieve our envisaged returns. If we In addition to the coronavirus, the German coal phaseout was one of the issues that shaped manage to do so, many good fiscal years will await RWE even beyond 2021. the past year. The exit has been given a legal framework, which has been cemented in an agreement between the federal government and the lignite companies. You indicated at the Mr. Schmitz, soon you will become an onlooker. At the end of April, you are resigning your beginning that you are satisfied with the result ... office, after twelve years on the Executive Board of RWE. Wouldn’t you have been keen to I find the solution that was reached to be acceptable. The decision to exit the coal business continue the RWE journey? by 2038 was made by politicians. We cannot and don’t want to challenge this. On the Well, as you said, I can still keep an eye on what's going on, albeit from the outside. But I’m 63 contrary, now we know where we stand and can plan for the future. It was important to me and I have to stop working at some point. Plus, you should always quit while you’re ahead. that the coal phaseout did not cause any unreasonable hardship for those affected. This In earnest, I’m grateful to be able to pass the baton at a time when RWE is doing well again applies to us as a company as well as to our employees. The commitments made by the after weathering the storms of the past. And I'm convinced the company will be in safe government and the collective agreement reached in August 2020 ensure that there will be hands with Markus Krebber and his team. Of course, I look forward to being able to spend no such hardships and that no one will be left high and dry. more time with my family and not having to be available all the time. Waking up in the morning without having to check your e-mails immediately is a luxury. And this is the luxury Do you realise that by closing RWE’s last two German hard coal-fired power stations, you I am going to enjoy now. have effectively eliminated the company’s very first core business? This interview was conducted by Burkhard Pahnke and Jérôme Hördemann. Of course I’m aware of that. After all, I’m familiar with RWE’s history. However such issues are secondary when we make decisions about our future. The closure of the state-of-the-art Westfalen E block was a huge surprise to many. But we went over everything with a fine tooth comb and are convinced that it was the right course of action. And reducing emissions 8 RWE Annual Report 20201 To our investors The Executive Board of RWE AG 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information 1.2 The Executive Board of RWE AG Dr. Rolf Martin Schmitz Chief Executive Officer Dr. Markus Krebber Chief Financial Officer Chief Executive Officer from 1 May 2021 Rolf Martin Schmitz, born in 1957 in Mönchengladbach, holds a doctorate in mechanical Markus Krebber, born in 1973 in Kleve, is a trained banker and holds a doctorate in engineering. His first career milestones were STEAG AG from 1986 and VEBA AG from economics. He started his career in 2000 at McKinsey & Company. Thereafter, he held 1988, after which he was appointed a Member of the Board of Management of rhenag various managerial positions at Commerzbank AG. In November 2012, Markus Krebber Rheinische Energie AG in 1998. Mr. Schmitz then held several managing board positions at joined the Board of Directors of RWE Supply & Trading GmbH, where he was responsible for Thüga AG and Thüga Beteiligungen AG. In addition, Rolf Martin Schmitz was Chairman of finance, assuming chairmanship in March 2015. Markus Krebber has been the Chief the Board of Directors of E.ON-Kraftwerke GmbH and of the Board of Management of Financial Officer of RWE AG since October 2016. In May 2021, he will succeed Rolf Martin RheinEnergie AG. In May 2009, he joined the Executive Board of RWE AG and was appointed Schmitz as Chief Executive Officer. Chief Executive Officer in October 2016. From May 2017 to October 2020, he was also the company's Labour Director. Rolf Martin Schmitz will retire from the Executive Board at the end of April 2021. 9 RWE Annual Report 20201 To our investors The Executive Board of RWE AG 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Dr. Michael Müller Member of the Executive Board since 1 November 2020 Chief Financial Officer from 1 May 2021 Zvezdana Seeger Member of the Executive Board since 1 November 2020 Chief Human Resources Officer and Labour Director Michael Müller, born in 1971 in Cologne, is an economist and holds a doctorate in Zvezdana Seeger, born in 1964 in Jajce, Bosnia and Herzegovina, holds a degree in economics. mechanical engineering. After five years at McKinsey & Company, in mid-2005 he joined the She started her career in mechanical engineering. From 1995 to 2008, she worked for RWE Group where he held executive positions at RWE Power AG, RWE Generation SE and Deutsche Telekom AG, exiting as Managing Director of T-Systems Enterprise Service GmbH. RWE AG. In September 2016, he became the Managing Director of RWE Supply & Trading In 2010, Zvezdana Seeger joined the Board of Directors of DHL Global Forwarding Freight. GmbH in charge of finance. Since November 2020, Michael Müller has been a Member of In 2015, she was responsible for IT and operations on the Board of Management of Postbank the Executive Board of RWE AG where he will succeed Markus Krebber as Chief Financial AG. After Postbank was folded into DB Privat- und Firmenkundenbank AG, she sat on the Officer in May 2021. Until then, he will remain a Managing Director of RWE Supply & Trading Board of Management of the latter company. In addition, she was COO of the Private and GmbH. Corporate Business Unit of Deutsche Bank AG. As of November 2020, Zvezdana Seeger was appointed to the Executive Board of RWE AG, with responsibility for human resources and IT. She is also the company's Labour Director. 10 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information 1.3 Supervisory Board report “In the midst of the coronavirus pandemic, RWE set the stage for an even faster expansion of renewable energy, thus overachieving its goal for the year.” RWE definitely bucked the trend! Like a sailboat staying its course in choppy waters, the company continued its transformation that began with the E.ON transaction almost without losing steam. The asset swap, which was completed in legal terms in the middle of 2020, advanced us to the ranks of the world's leading renewable energy companies. Now RWE is rapidly transitioning its electricity generation portfolio to renewable sources and intends to become carbon neutral by 2040 as a result. This course is widely endorsed by the general public and the capital market in particular, as evidenced by our share's strong performance. Despite the coronavirus pandemic, RWE shareholders earned a 30 % return on their investment in 2020. This put our share among the DAX frontrunners for the fourth time in a row. And there was more good news last year: the company made rapid progress in the expansion of renewable energy despite the coronavirus pandemic. In 2020, RWE completed wind and solar farms with a total capacity of more than 800 MW. Only in isolated cases were there delays due to COVID-19, but none lasted more than a few months. I would also like to highlight the capital increase in August and the acquisition of Nordex's European development business – two transactions that were not foreseeable at the beginning of 2020, which will help drive the company's growth further. This means that, in the midst of the coronavirus pandemic, RWE set the stage for an even faster expansion of renewable energy, thus exceeding its target for the year. RWE also tackled the second major challenge – the coal phaseout – with determination. Who could have imagined at the beginning of 2020 the unusual challenges the year would Both of the company's German hard coal units placed winning bids in the first shutdown have in store for us all. The coronavirus pandemic caught modern civilisation off guard and auction conducted by the Federal Network Agency. These blocks were shut down at the end demonstrated how shockingly vulnerable we are despite all the progress we make. I hope, of 2020. But let us not forget that electricity production from hard coal was the driver of dear reader, that you stay healthy and manage to cope with the negative effects of the RWE's charge to become Germany's leading power utility after it was founded over lockdown measures. Unfortunately, the latter cannot be said for many companies. We have 120 years ago. This business is now part of Germany's history. At the same time, RWE is seen entire sectors fall into an existential crisis. Based on expert estimates, 2020 saw implementing the legally mandated lignite phaseout. The first unit was taken off the grid at Germany experience its biggest drop in growth since the financial crisis of 2008 / 2009. the end of December although the compensation regulations are still pending EU approval. 11 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information I think that this sends an important signal: RWE is moving fast to protect the climate – and is decisions. The Executive Board informed us of all material aspects of business developments, doing much more than is legally required. What other company out there can claim to have the earnings situation as well as the risks and the management thereof both verbally and in reduced its carbon dioxide emissions by 62 % in just eight years without selling major parts writing. This was done regularly, extensively and in a timely fashion. of its business? I don't know of a single one. Our fast track towards reducing emissions proves that RWE is acting in line with the Paris climate targets. This was recently confirmed We took our decisions on the basis of detailed reports and draft resolutions submitted by the by the Transition Pathway Initiative and the Science Based Target Initiative, both of which Executive Board, which we discussed in depth in our plenary sessions and committees. We are proponents of a low-emission economy over the long term. were also informed by the Executive Board of projects and transactions of special Looking back at 2020, I must highlight two issues directly relating to the Supervisory Board's the resolutions required of us by German law or the Articles of Incorporation, occasionally by work. The first matter is the new composition of the Executive Board. Rolf Martin Schmitz will circular. As Chairman of the Supervisory Board, I was constantly in touch with the Executive step down as CEO at the end of April 2021. We made early arrangements for his succession Board, allowing us to discuss major developments without delay. The company helped us to and have found what I believe to be a very good solution: Markus Krebber, our current CFO, acquire the expertise we needed to fulfil our tasks by organising in-house informational will spearhead the company in the future. We expect him to continue the current strategy, events on topics of special relevance. This is noteworthy given that the German Corporate keeping RWE on course for success. He will receive assistance from Michael Müller and Governance Code (GCGC) requires supervisory board members to ensure that they take Zvezdana Seeger, who we appointed to the Executive Board as of 1 November 2020. More their basic and advanced training into their own hands. importance or urgency in extraordinary meetings as well as between meetings. We passed on this later. The second matter, which was a premiere for my fellow Supervisory Board members and me, was the first completely virtual Annual General Meeting ever held in RWE Main points of debate of the Supervisory Board meetings. Last year, the Supervisory AG's history. The corona pandemic didn't give us a choice. Although this involved working Board convened for five ordinary and two extraordinary meetings. Due to the COVID-19 under new legal and organisational conditions, the Annual General Meeting went smoothly. social distancing restrictions, we conducted our sessions strictly online from April onwards. The employees in charge at RWE proved extremely professional and flexible. In my capacity However, this was not to the detriment of the quality of our work on the Supervisory Board. as Chairman of the Annual General Meeting, I would like to express my sincere gratitude for In our meetings, we were informed by the Executive Board in great detail of transactions and this. I would also like to thank our shareholders, who would have loved to visit us at the events of significance to RWE. We discussed certain agenda items without involving the Grugahalle in Essen, but were understanding of the fact that it was impossible to hold an Executive Board. The shareholder and employee representatives always met separately in-person event. We hope that they will also be understanding of our holding a completely before Supervisory Board meetings, so that they had the opportunity to consult on matters virtual Annual General Meeting in 2021 as well. and establish joint positions where necessary in advance of the plenary sessions. Now I would like to tell you about some of the formal aspects of the Supervisory Board's When in session, we concerned ourselves with RWE's transformation into a leading work in 2020. As usual, we fulfilled all of the duties imposed on us by German law and renewable energy company both frequently and in great depth. Further focal points of the Articles of Incorporation. We advised the Executive Board on running the company and debate were the effects of the corona crisis, the restaffing of the Executive Board and monitored its actions with great care. Moreover, we were involved in all fundamental the German coal phaseout. The following issues were discussed at our meetings: 12 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Our first session last year took place on 17 January. We convened an extraordinary • The topics addressed in April were also the focal point of the ordinary session on 25 June. meeting to debate the shutdown roadmap for our German lignite-fired power plants One of the tasks was to prepare the virtual Annual General Meeting, which had been envisaged by the government as well as the compensation offered. At the time, the talks scheduled for the following day. Succession planning for the Executive Board was discussed between the federal and state administrations and businesses regarding the details of the at length yet again. Furthermore, we were kept abreast of how RWE was dealing with lignite phaseout had nearly come to a conclusion. We encouraged the Executive Board to the coronavirus pandemic and approved the new Executive Board remuneration system, accept the compromise that was becoming apparent. Soon thereafter, on 29 January, which is described in more detail in the invitation to the 2021 Annual General Meeting. the federal government adopted the draft law on the coal phaseout. The invitation is available at www.rwe.com/agm. Another focal topic was the public law • At our ordinary meeting on 6 March, we discussed and approved the 2019 financial interests of the company with regard to the statutory regulations governing the lignite contract between RWE and the German government designed to protect the justified statements of RWE AG, the consolidated financial statements, and the separate phaseout. consolidated non-financial report. In addition, we approved the agenda for the Annual General Meeting, which was originally scheduled for 28 April. The Executive Board • Just a month later, on 31 July, we held an extraordinary meeting at which we discussed updated us on the legislative process regarding the German coal phaseout and on the RWE's plan to acquire the European development business of wind turbine manufacturer acquisition of the King's Lynn power station in the UK, which had just been completed. Nordex. Since we – just as the Executive Board – were of the opinion that the acquisition of We thoroughly deliberated RWE's strategy. The goal of becoming carbon neutral by 2040 the project pipeline focusing on France harboured attractive potential for RWE to grow, and the path envisaged to reach it met with our full approval. Effective incentives for we approved the acquisition. In that session, we also deliberated how to finance the implementing the strategy are provided by the new Executive Board remuneration Nordex transaction and the associated accelerated expansion of renewable energy. system, the details of which were another topic of debate. Furthermore, we adopted the One of the options on the table was to use authorised capital and issue new RWE shares new skills matrix for the members of our corporate body, which we had refined in 2019. excluding subscription rights. We transferred to the Executive Committee the right to In so doing, we drew on the findings obtained when reviewing the efficiency of our work. decide on such a measure. This enabled the company to quickly take advantage of a The former matrix was supplemented by several skills, to which we accord increasing favourable situation on the capital market without having to again involve the entire importance, e. g. know-how in the fields of renewable energy and digitisation. The skills Supervisory Board. Thanks to this flexibility, RWE managed to increase its capital by matrix must be taken into account when selecting candidates for appointment to the €2 billion at very short notice in August 2020. Supervisory Board. Therefore, it will be accorded great importance in 2021 as the corporate body will be restaffed in April. • At our ordinary meeting on 18 September, we debated the succession planning for the Executive Board once again. Given that Rolf Martin Schmitz would soon retire and • Our ordinary meeting on 28 April was dominated by the coronavirus pandemic and the Markus Krebber had been appointed the company's future CEO, the positions of CFO, first lockdown. This was precisely the day on which the 2020 Annual General Meeting CHRO and Labour Director had to be filled. Against this backdrop, the Supervisory Board would have taken place based on our original planning if we had not been forced to appointed Zvezdana Seeger and Michael Müller to the Executive Board. During this postpone it to the end of June due to COVID-19. The Supervisory Board passed a resolution session, we also discussed the German Coal Phaseout Act, which had been passed by the to hold the Annual General Meeting as a purely virtual event in order to protect both Lower and Upper Houses of Parliament on 3 July. Moreover, the Executive Board reported employees and shareholders alike. Another item on the agenda was the succession plan on the significance of hydrogen to RWE as well as on various aspects of the renewable for the CEO Rolf Martin Schmitz. energy business. 13 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information • At our ordinary meeting on 11 December, we reviewed and adopted the company's • The Audit Committee was in session four times, at which all predetermined focal topics planning for fiscal 2021. In addition, we fulfilled our corporate governance reporting were addressed. The Committee was extremely careful in reviewing the financial duties. Together with the Executive Board, we adopted an updated statement of statements of RWE AG and the Group, together with the combined review of operations, compliance pursuant to Section 161 of the German Stock Corporation Act and approved the report for the first half of the year, the quarterly statements and the consolidated the passages of the corporate governance declaration relating to the Supervisory Board non-financial report. It discussed the financial statements with the Executive Board before in accordance with Section 289a of the German Commercial Code. These documents they were published and received reports on the outcome of the audits and audit-like can be viewed at www.rwe.com/en/statement-of-compliance-and-reports and reviews from the independent auditors. Furthermore, the Audit Committee submitted www.rwe.com/corporate-governance-declaration. A further point of focus of the meeting a recommendation to the Supervisory Board regarding the election of the independent was RWE's hydrogen strategy, on which we were informed extensively by the Executive auditors for fiscal 2020, prepared the grant of the audit award to the independent Board. We also discussed the sale of a 49 % stake in the Humber UK offshore wind farm. auditors including the fee agreement, and set the priorities of the audit. The Committee Following our approval, the transaction was completed on 15 December. We also gave verified the independence of the auditors and the quality of the audit. In addition, as usual, the go-ahead to the partial sale of four Texan onshore wind farms. During the session, the Committee was informed of the effectiveness of the accounting-related Internal we also debated how to handle related party transactions. The German law on the Control System (ICS). The report did not reveal any issues that would call the effectiveness implementation of the Second Shareholders Directive (ARUG II) stipulates that, under of the ICS into question. Furthermore, the Committee dealt with the planning and findings certain conditions, these transactions are subject to the approval of a Supervisory Board of internal audits, the RWE Group’s exposure to risk pursuant to the German Corporate or one of its committees. We tasked the Audit Committee with performing the review and Control and Transparency Act, the risk management system of RWE Supply & Trading, valuation of such transactions required by law. 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 Supervisory Board committees. Last year, the Supervisory Board had six standing with the Committee Chairman between meetings. In-house experts were consulted committees, the members of which are listed on page 230. These committees are charged regularly. with preparing topics and resolutions for plenary sessions. In certain cases, they exercise decision-making powers if they have been conferred on them by the Supervisory Board. • The Personnel Affairs Committee held five meetings during the year being reviewed. The Supervisory Board is informed of the work of the committees by their chairs at every Consultations centred on the succession plan for the Executive Board of RWE AG and the ordinary meeting. In the year under review, a total of 18 committee meetings were held, new Executive Board remuneration system. which I would like to touch upon in more detail. • The Executive Committee held four meetings, three of which took place in August to Board elections, scheduled for 2021. In this context, the Committee also discussed prepare and approve the capital increase. The Committee conducted the usual discussion procedural matters relating to the planned introduction of staggered tenures for the of the company’s planning for fiscal 2021 as well as the outlook for the two subsequent shareholder representatives. Another point of debate was the remuneration for work done years in its fourth session, which took place in December. on the committees of the Supervisory Board. We are of the opinion that compensation for • The Nomination Committee convened three times. The focal point was the Supervisory these tasks should increase. 14 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information • The Strategy and Sustainability Committee (formerly the Strategy Committee) held • The Mediation Committee pursuant to Section 27, Paragraph 3 of the German two meetings. In its first session, which was held in February, it dedicated itself to the new Co-Determination Act did not have to meet in 2020. Group strategy, which was presented to the public soon thereafter, in mid-March. At its second meeting, the Committee discussed RWE's plans with respect to the hydrogen economy. Attendance at meetings in fiscal 2020 by Supervisory Board member Supervisory Board Executive Committee Audit Committee Dr. Werner Brandt, Chairman Frank Bsirske, Deputy Chairman Michael Bochinsky Sandra Bossemeyer Martin Bröker Anja Dubbert Matthias Dürbaum Ute Gerbaulet Prof. Dr. Hans-Peter Keitel Dr. h. c. Monika Kircher Harald Louis Dagmar Mühlenfeld Peter Ottmann Günther Schartz Dr. Erhard Schipporeit Dr. Wolfgang Schüssel Ullrich Sierau Ralf Sikorski Marion Weckes Leonhard Zubrowski 1 Dr. Werner Brandt attended meetings of the Audit Committee as a guest. 4/4 4/4 4/4 4/4 4/4 4/4 4/4 4/4 4/41 3/4 4/4 4/4 4/4 4/4 4/4 7/7 7/7 7/7 7/7 7/7 7/7 7/7 6/7 7/7 6/7 7/7 7/7 7/7 7/7 7/7 7/7 7/7 7/7 7/7 6/7 15 Personnel Affairs Committee 5/5 5/5 Nomination Committee 3/3 Strategy and Sustainability Committee 2/2 2/2 3/3 2/2 3/3 2/2 2/2 1/2 5/5 5/5 5/5 5/5 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Attendance. The table on the previous page contains an overview of Supervisory Board The Supervisory Board reviewed the financial statements of RWE AG and the Group, the member attendance at the meetings of this corporate body and its committees. As the combined review of operations, the Executive Board’s proposal regarding the appropriation Mediation Committee did not convene in 2020, it has been omitted from this table. Here is of distributable profit, and the consolidated non-financial report. No objections were raised an example of how to interpret the numbers: ‘3 / 4’ means that the individual attended as a result of this review. As recommended by the Audit Committee, the Supervisory Board three out of four meetings. As can be seen from the overview, absences were an exception. approved the results of the audits of the financial statements of RWE AG and the Group and approved both financial statements. The 2020 financial statements are therefore adopted. Conflicts of interest. The members of the Supervisory Board are obliged by law and the The Supervisory Board concurs with the Executive Board’s proposal regarding the GCGC to immediately disclose any conflicts of interest they have. We were not notified of appropriation of profits, which envisages paying a dividend of €0.85 per share. any such conflict in fiscal 2020. Personnel matters. The composition of the Supervisory Board and of its committees did not Financial statements for fiscal 2020. PricewaterhouseCoopers GmbH Wirtschaftsprüfungs- change in the past fiscal year. However, there were some major personnel changes on the gesellschaft (PWC) audited and issued an unqualified auditor’s opinion on the 2020 financial Executive Board of RWE AG. I told you earlier that Markus Krebber will take over as CEO from statements of RWE AG, which were prepared by the Executive Board in compliance with the Rolf Martin Schmitz. This resolution was passed by circular on 27 July after the Supervisory German Commercial Code, the financial statements of the Group prepared pursuant to Board had paved the way for this at its meeting of 28 April. By mutual consent, we Section 315a of the German Commercial Code in compliance with International Financial shortened the tenure of Mr. Krebber, which would have expired on 30 September 2024, to Reporting Standards (IFRS) as well as the combined review of operations for RWE AG and 30 June 2021 and appointed him an ordinary member of the Executive Board for the the Group including the accounts. In addition, PWC subjected the Non-financial Report to a period thereafter running from 1 July 2021 to 30 June 2026. As Rolf Martin Schmitz will limited assurance audit and found that the Executive Board had established an appropriate resign his office at the end of April 2021 – two months earlier than planned – Markus Krebber early risk detection system. The company had been elected independent auditor by the will take over as CEO as of 1 May 2021. In addition to the succession arrangements 2020 Annual General Meeting. Thereafter, the Supervisory Board had commissioned it to for Mr. Schmitz, we took two further personnel-related decisions: in our session on audit the aforementioned financial statements and reports. 18 September, we appointed Michael Müller and Zvezdana Seeger to the Executive Board as of 1 November 2020, for an initial term of three years. Michael Müller will succeed The 2020 Annual Report and the audit reports as well as documents supporting the annual Markus Krebber as CFO. Zvezdana Seeger was entrusted with the human resources and IT financial statements were submitted to the members of the Supervisory Board in good time. offices. She has also been the company's Labour Director since 1 November. Furthermore, the Executive Board commented on the documents in the Supervisory Board’s balance sheet meeting of 10 March 2021. The independent auditors reported at this Thanks to our new staffing decisions, which we reached following extensive consultations meeting on the material results of the audit and were available to provide supplementary and with the expert support of the Personnel Affairs Committee, we have the right people in information. The Audit Committee had previously concerned itself in depth with the financial the right positions to ensure that the new RWE can continue to chart its course for success. statements of RWE AG and the Group, as well as audit reports, during its meeting on If there is one person to whom this is particularly important, then it has to be Rolf Martin 9 March 2021, with the auditors present. It recommended that the Supervisory Board Schmitz, as it was with him as CEO that RWE set out on this course. When he steps down in approve the financial statements as well as the appropriation of profits proposed by the 2021, he can do so safe in the knowledge that he is passing on a company that reinvented Executive Board. itself in difficult times and transformed itself into a profitable player in the energy transition. 16 RWE Annual Report 20201 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information He deserves the utmost recognition for everything he has done for the company. On behalf of the entire Supervisory Board, I would like to take this opportunity to express my heartfelt gratitude to him for his constructive, respectful and extremely successful co-operation. A strong performance – thanks to the people who are RWE. RWE's impressive development is naturally not solely attributable to any one single individual, but of all of the employees who dedicate their work and lifeblood to this company. They made sure that the new RWE continued its transformation at an unrelenting pace, despite the coronavirus pandemic. The extremely level-headed way in which they dealt with the crisis, their ability to adapt processes and workflow to the unprecedented circumstances – with the virtual Annual General Meeting I mentioned earlier as a shining example – and the strict discipline they display in abiding by the infection control concepts in their daily work have proven that we can always count on the people at RWE. Speaking for the entire Supervisory Board, I would like to express my sincere gratitude to them. On behalf of the Supervisory Board Werner Brandt Chairman Essen, 10 March 2021 17 RWE Annual Report 20201 To our investors RWE on the capital market 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information 1.4 RWE on the capital market There was a lot of volatility on stock markets in 2020, a year that ended on an DAX records slight gain for the year despite COVID-19. The coronavirus pandemic led to encouraging note after a collapse in share prices in the spring caused by the corona a turbulent year on stock markets. After hitting a record high of 13,789 points in mid- crisis. The DAX closed up by 4 %, after losing more than one-third of its value on the way. February, the DAX lost over one-third of its value in just a few weeks. This was mainly due to Major stimulus came from the expansionary monetary and fiscal policy in the Eurozone, the outbreak of the coronavirus pandemic and the first set of lockdown measures, which which allowed for the economic consequences of the pandemic to be mitigated. RWE temporarily caused parts of the economy to grind to a halt. Germany's blue-chip index shareholders looked back on a very pleasing performance: the total return on our share gained substantial traction in mid-March, after bottoming out. Loosened COVID-19 was 30 %, ranking our stock among the best in the DAX for the fourth consecutive year. restrictions, the announcement of state economic aid packages, and the rapid recovery of The main reason for this is our transformation into a leading renewable energy the Chinese economy provided major stimulus to this end. The prospects of a vaccine company. This makes us not only more sustainable and financially strong, but also contributed to improving sentiment on stock markets as the year progressed. Despite the more crisis-proof. Total return of the RWE share compared with the DAX and STOXX Europe 600 Utilities % (average weekly figures) 40 30 20 10 0 – 10 – 20 – 30 – 40 3 1 D ec 2 0 1 9 3 1 M ar 2 0 2 0 3 0 Jun 2 0 2 0 3 0 Sep 2 0 2 0 3 1 D ec 2 0 2 0 RWE share STOXX Europe 600 Utilities DAX Source: Bloomberg. 18 significant rise in new infections in Germany after the summer break and the renewed lockdown in late autumn, the DAX maintained its course for recovery, and just before the end of the year actually eclipsed the record achieved in February. Germany’s lead index closed the year at 13,719 points, representing a gain of 4 % in 2020. RWE share registers 30 % total return. The RWE share lost pace only briefly during the corona crisis, continuing the upward trend on which it embarked in 2017. It closed trading at €34.57 at the end of 2020. Including the dividend payment of €0.80, this corresponds to a total return for the year of 30 %. Our share thus outperformed the DAX for the fourth consecutive year. The STOXX Europe 600 Utilities sector index (+ 11 %) also failed to keep up with it. The RWE share's unwavering positive performance is predominantly due to our becoming a leading renewable energy company as a result of the asset swap with E.ON and our rapid strengthening of this position. Our analysts and investors welcome this transformation process, as the renewable energy business is marked by relatively stable income and widespread political acceptance. This has made RWE more financially robust, which has proven to be a great advantage especially during the corona crisis. RWE's share price also benefited from the clear legal framework for Germany's coal phaseout established by policymakers and the resulting substantial decrease of the risks to which affected companies are exposed (see pages 37 et seq.). RWE Annual Report 20201 To our investors RWE on the capital market 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE share indicators Earnings per share Adjusted net income per share Cash flows from operating activities of continuing operations per share Dividend per share Dividend payment2 Share price End of fiscal year Highest closing price Lowest closing price Share dividend yield3 € € € € € million € € € % 2020 1.56 1.90 6.47 0.851 5751 34.57 35.02 21.00 2.5 2019 13.82 – – 1.59 0.80 492 27.35 28.69 18.97 2.9 2018 0.54 – 7.50 0.70 430 18.97 22.48 15.10 3.7 2017 3.09 2.00 – 6.13 1.50 922 17.00 23.14 11.80 8.8 2016 – 9.29 1.26 3.83 – 5 11.82 15.95 10.17 – Number of shares outstanding (annual average) thousands 637,286 614,745 614,745 614,745 614,745 Market capitalisation at the end of the year2 € billion 23.4 16.8 11.7 10.3 7.1 1 Dividend proposal for RWE AG’s 2020 fiscal year, subject to the passing of a resolution by the 28 April 2021 Annual General Meeting. 2 Calculated on the basis of the shares outstanding. As of 31 December 2020, this number totals 676,220,048. 3 Ratio of the dividend per share to the share price at the end of the fiscal year. RWE raises capital by €2 billion. In August 2020, we issued 61.5 million new RWE shares Dividend of €0.85 per share proposed for past fiscal year. Despite the rise in the number to institutional investors, thereby increasing the company‘s capital stock by 10 %. Based on of RWE shares due to the capital increase, the Executive Board maintains its dividend target the issue price of €32.55 per share, we achieved gross proceeds of €2 billion, which we for fiscal 2020. Together with the Supervisory Board, it will propose to the Annual General intend to spend on additional projects to expand renewable energy. The capital increase Meeting on 28 April 2021 a dividend of €0.85 per share. This would be €0.05 more than in caused the number of RWE shares to rise to 676.2 million. The new and old stock confer the the preceding year. The dividend proposal reflects the successful business trend in the past same rights. More detailed information on the capital increase can be found on page 42. year as well as RWE's bright prospects. 19 RWE Annual Report 20201 To our investors RWE on the capital market 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Shareholder structure of RWE AG1 However, a higher threshold of 25 % applies to asset management companies like  1 % Employee shareholders  7 % BlackRock, Inc. BlackRock. 12 % Private shareholders 87 % Institutional shareholders 24 % Germany 24 % USA/Canada 19 % 12 % UK Continental Europe excluding Germany  8 % Rest of the world 80 % Other institutional shareholders About 1 % of our stock is owned by our current and former staff members. German and British Group companies offer their employees the opportunity to take shares in RWE on preferential terms. Last year, 7,641 people, representing 44 % of all qualifying staff members, made use of these offers. They bought a total of 332,665 shares. The preferential terms and the administration of the employee share ownership programmes led to an expense of €3,108,005. RWE represented on numerous stock markets. RWE shares are traded on the Frankfurt Stock Exchange and other stock exchanges in Germany, as well as via electronic platforms such as Xetra. They are also available on stock markets in the rest of Europe. In the USA, instead of our shares being traded, RWE is represented via American Depositary Receipts (ADRs) in a Level 1 programme. ADRs are share certificates issued by US depositary banks, representing a certain number of a foreign company’s deposited shares. Under RWE’s 1 As of the end of 2020; percentages reflect shares in subscribed capital. Sources: RWE data and notifications from programme, one ADR represents one share. shareholders in accordance with the German Securities Trading Act. Broad international shareholder base. Based on our latest survey, at the end of 2020, an Reuters: Xetra estimated 87 % of the total of 676.2 million RWE shares were held by institutional investors and 13 % were owned by individuals (including employees). Institutional investors from Germany owned 24 % of RWE. This investor group accounted for 12 % of RWE’s subscribed capital in other countries in Continental Europe and 19 % in the United Kingdom. In the USA and Canada, its share was a combined 24 %. At the end of the year, RWE AG’s single-largest Reuters: Frankfurt Stock Exchange Bloomberg: Xetra Bloomberg: Frankfurt Stock Exchange German Securities Identification Number shareholder was the US asset management company BlackRock, which owned 7 % of our International Securities Identification Number (ISIN) subscribed capital. ADR CUSIP Number Ticker symbols and identification numbers of the RWE share RWEG.DE RWEG.F RWE GY RWE GR 703712 DE0007037129 74975E303 The free float of our shares considered by Deutsche Börse in terms of index weighting was 100 % when this report went to print. Normally, shares held by investors accounting for at least a cumulative 5 % of the capital stock are not included in the free float. 20 RWE Annual Report 202002 Combined review of operations 2.1 Strategy 2.2 Innovation 2.3 Business environment 2.4 Major events 2.5 Business performance 2.6 Financial position and net worth 2.7 Notes to the financial statements of RWE AG (holding company) 2.8 Outlook 2.9 Development of risks and opportunities 2.10 Disclosure relating to German takeover law 2.11 Remuneration report 22 29 34 42 47 59 64 66 69 79 82 Limondale solar farm, Australia 1 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.1 Strategy Our asset swap with E.ON has turned us into one of the world’s leading renewable New segment structure introduced in 2020. In our financial reporting for 2020, we energy companies. We are now an all-rounder in electricity generation at the forefront present the RWE Group in a new structure. We no longer state ‘innogy – continuing of creating a sustainable energy system. In addition, we will ensure security of supply operations’ and ‘acquired E.ON operations’ separately as they have become integral parts of with our flexible power plants. RWE aims to become carbon neutral by 2040. To this end, the RWE Group. Our main business, electricity generation, is now broken down by energy we will invest billions in wind energy, photovoltaics and storage technologies, enter the source, whereas energy trading is still presented separately. This results in the following five green hydrogen production business, and phase out electricity generation from coal. segments: (1) Offshore Wind, (2) Onshore Wind / Solar, (3) Hydro / Biomass / Gas, In doing so, we are playing our part in achieving the Paris climate goals, as officially (4) Supply & Trading and (5) Coal / Nuclear. Segments (1) to (4) represent our core business. confirmed by the independent Science Based Targets Initiative at the end of 2020. This is where we want to grow. In (5), we have pooled our German electricity generation from lignite, hard coal and nuclear fuel, which will lose importance due to exit roadmaps established by the state. Figures for 2019 have been adapted to the new segment structure Transformation into a specialist in sustainable power generation and energy trading. retroactively to enable comparability. Our company has changed fundamentally over the last few years. In the past, RWE was an integrated utility, which was active along the entire energy value chain. Now, we are a The segments are made up of the following activities: company specialising in power production and energy trading that wants to drive the transformation of the energy sector, aiming for more sustainability. Our goal is carbon- • Offshore Wind: Our business involving offshore wind is subsumed here. It is overseen by neutral electricity supply that is both secure and affordable. our Group company RWE Renewables. The road to the new RWE began in 2016 when we pooled the Renewables, Retail and • Onshore Wind / Solar: This is the segment in which we pool our onshore wind, solar power Grid & Infrastructure divisions in a subsidiary called innogy and took it to the stock market. and battery storage activities. Here again, operating responsibility lies with One-and-a-half years later, in early 2018, we agreed an extensive asset swap with E.ON, RWE Renewables. which was implemented in two steps. First, we sold our 76.8 % investment in innogy in September 2019 and in return received E.ON’s renewable energy business, a 16.67 % stake • Hydro / Biomass / Gas: This segment encompasses our run-of-river, pumped storage, in E.ON, and the minority interests in our nuclear power stations Gundremmingen (25 %) and biomass and gas power stations. It also includes the Dutch Amer 9 and Eemshaven hard Emsland (12.5 %) held by the E.ON subsidiary PreussenElektra. The second step was taken in coal power plants, which we are increasingly co-firing with biomass, as well as the project mid-2020 and involved transferring certain innogy operations back to RWE in legal terms: management and engineering services specialist RWE Technology International. These the renewable energy business, the German and Czech gas storage facilities, and a 37.9 % activities are overseen by RWE Generation. In addition, this company has been stake in the Austrian energy utility KELAG. Now we are focusing on the integration of the responsible for the design and implementation of RWE’s hydrogen strategy since the acquired business with more than 4,000 employees into the RWE organisation. beginning of 2021. The 37.9 % stake in the Austrian energy utility KELAG previously held by innogy is also assigned to Hydro / Biomass / Gas. 22 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Supply & Trading: This is where we report proprietary trading of energy commodities. The elements of our emissions reduction strategy are the rapid expansion of zero-carbon segment is managed by RWE Supply & Trading, which also acts as an intermediary for gas, renewable energy, increased utilisation of storage technologies and the use of carbon- supplies key accounts with energy, and undertakes a number of additional trading-related neutral fuel to produce electricity. In doing so, we are acting in line with the Paris climate activities. The German and Czech gas storage facilities which we received from innogy goals, as recently confirmed by the Transition Pathway Initiative and the Science Based also form part of this segment. Targets initiative. Our brand appearance demonstrates how seriously we take our environmental responsibility. RWE’s new purpose, ‘Our energy for a sustainable life’, is an • Coal / Nuclear: Our German electricity generation from lignite, hard coal, and nuclear fuel expression of the determination of the Group and its approximately 20,000 employees to as well as our lignite production in the Rhenish mining region to the west of Cologne are ensure a sustainable energy system. subsumed in this segment. This is also where we report our investments in Dutch nuclear power plant operator EPZ (30 %) and Germany-based URANIT (50 %), which holds a 33 % The new RWE: a world leading renewable energy company. The transaction with E.ON has stake in uranium enrichment specialist Urenco. The aforementioned activities and turned us into a world-leading producer of electricity from renewable sources. We want to investments are assigned to our Group companies RWE Power (lignite and nuclear) and expand this business rapidly. By the end of 2020, we already had renewable energy assets RWE Generation (hard coal). with a total capacity of 10.8 GW, with 9.2 GW attributable to wind and 0.2 GW to photovoltaics. These figures reflect the generation capacity allocable to us on a prorated Group companies with cross-segment tasks such as the Group holding company RWE AG basis, i. e. in accordance with the stakes that we hold. In addition to existing assets, we have are stated as part of the core business under ‘other, consolidation’. This also applies to our a wide portfolio of growth projects in various stages of development. Here again, the focus is stakes of 25.1 % in German transmission system operator Amprion and 15 % in E.ON. on wind, followed by solar PV. On top of being environmentally friendly, renewable energy However, we recognise the dividends we receive from E.ON in the financial result. also enables stable and attractive returns. Electricity production from renewables is clearly Furthermore, ‘other, consolidation’ contains consolidation effects. already our strongest income generator. In the past fiscal year, it already accounted for about half of our adjusted EBITDA. Our goal by 2040: RWE will become carbon neutral. As one of the world’s leading energy companies, we shoulder special responsibility for the implementation of the emission Fast growth in wind and solar power. We want to grow our wind and solar capacity to over reduction targets in the energy sector. The European Union aims to be carbon neutral by 13 GW (pro-rata) by the end of 2022. We plan to make over €1.5 billion in net investments 2050. Our objective is to achieve the same goal by 2040, and we have already made good to this end every year. Reinvesting proceeds from sales of investments will actually cause the progress on this path. We reduced our annual carbon dioxide emissions from electricity gross expenditure to be much higher. In August 2020, we expanded our financial headroom production by 62 % from 2012 to 2020. By 2030, we plan to have lowered them by at by increasing our capital by €2 billion. least 75 %. The phaseout of electricity generation from coal will play a central role. Further 23 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information Whenever we tackle wind or solar projects, we want to cover the entire value chain from meet the technical and economic requirements for securing supply in the long term. But we development to construction and operation. Geographically, we are focusing on markets in are working on changing the situation. RWE has been involved in the development, Europe, North America and the Asia-Pacific region. As of the balance-sheet date, our largest construction and operation of battery storage systems for several years now. We operate construction project was the UK North Sea wind farm Triton Knoll with a total installed such a unit in the town of Herdecke in the Ruhr area with a storage capacity of 7 MWh, capacity of 857 MW, which is scheduled to have taken all its turbines online by 2022. We are making it one of the biggest in Germany. We are rolling out our largest battery project to also building huge onshore wind farms, e. g. Nysäter in Sweden with a capacity of 475 MW, date in Hickory Park, which is located in the south of the US state of Georgia. The site will be which is expected to be completed in 2021. Moreover, we want to commission our home to a 196 MW solar farm coupled to an 80 MWh battery storage system. This Limondale solar farm in New South Wales, Australia, this year, too. With an installed capacity combination will enable electricity feeds into the local grid to be optimised, significantly of 249 MW, it will be one of the most powerful installations of its kind in the country. improving the solar array’s yield. We want to launch further projects of this type. Concurrently, we are exploring innovative electrochemical storage methods. We have Thanks to our sizeable project pipeline, we firmly believe that we will make good progress in presented two research and development undertakings dedicated to this goal on page 32. the expansion of renewable energy over the long term. One advantage in this respect in Besides electrochemical storage, power-to-gas technologies can also make a substantial addition to the project experience and technical expertise of our teams is RWE’s established contribution to security of supply. They use electricity generated by carbon-neutral methods position in core markets such as Germany, the United Kingdom and the USA. Existing to produce hydrogen by electrolysis, which can later be used to generate electricity when production sites provide points of entry and synergistic potential for new build projects. For needed. instance, last year we concluded agreements for lease which allow us to utilise areas in the immediate vicinity of four existing UK offshore wind farms to develop expansion projects. Carbon-neutral processes: a target for all sectors. Reducing emissions in the electricity However, we also intend to grow in new markets. In 2020, we acquired a large number of sector – as intended by the EU – is not the end of the road to achieving carbon neutrality. onshore wind projects from Nordex in France, a country with attractive subsidy conditions in Three quarters of European demand for energy is still being met with oil, coal and gas. But which we were hardly present before. Furthermore, we are preparing to enter the Japanese, that is set to change. Electrification, in other words switching energy consumption to Taiwanese and South Korean markets where we want to implement offshore wind projects electricity produced by carbon-neutral methods, e. g. the use of heat pumps instead of oil together with local partners. and gas heating systems, also enables significant emission reductions in the manufacturing, heat and transportation sectors. Further advantages of electrification include boosting High-capacity storage: prerequisite for 100 % electricity generation from renewables. efficiency. For example, an electric vehicle is capable of using about 95 % of available Electricity generation from wind and solar power greatly depends on the weather, time of energy, compared to the mere 30 % achieved by internal combustion engines. And the day and season. Sometimes, power produced from renewable sources only covers a higher efficiency of electricity-based applications drives down the energy requirement. By fraction of demand, and at other times, it exceeds local needs to such an extent that contrast, demand for electricity generated by zero-carbon techniques – our most important production actually has to be throttled. Consequently, storage technologies are increasingly product – will increase steadily as electrification progresses. coming to the fore as renewable energy continues to be expanded. They usually do not yet 24 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information Hydrogen: integral component of the energy transition. The economy can only be network operators. Only recently, in November 2020, did we qualify in such an auction decarbonised completely if solutions are also found for applications where direct for the construction of a 300 MW grid stabilisation unit at the Biblis site. We are also electrification is not an option. Examples of this are the production of steel and fertilisers as considering buying existing gas-fired power stations. For instance, we acquired the 382 MW well as aviation and shipping. In the near future, these areas offer the greatest potential for King’s Lynn station in the east of England in early 2020. utilising hydrogen produced by zero-carbon methods. RWE intends to spur the expansion of the hydrogen economy, especially in Germany, the Netherlands, and the United Kingdom. Conversely, coal and nuclear power stations will increasingly lose importance within our In pursuit of this goal, we will work along the entire value chain, from green electricity generation portfolio. In Germany, nuclear energy is subject to a phaseout roadmap, which generation and hydrogen production by electrolysis to hydrogen trading and storage and stipulates a latest possible shutdown date for every single plant. Two RWE nuclear power the conclusion of commercially optimised supply agreements with major industrial stations are still online: Gundremmingen C and Emsland. We have permission to operate customers. In the last two years, we have forged numerous partnerships with businesses these assets until the end of 2021 and the end of 2022, respectively, after which we will and research institutes seeking to co-operate with us to create nationwide hydrogen shut them down. Thereafter, our nuclear operations will focus on dismantling our stations infrastructure. Examples of this are the German GET H2 and AquaVentus initiatives and the safely and efficiently. In addition, we are doing everything we can to ensure the continued Dutch Eemshydrogen and NortH2 ventures, on which we report in detail on pages 31 et seq. use of the nuclear power plant sites, as demonstrated by the aforementioned grid Further information on this topic can be found at www.rwe.com/hydrogen. stabilisation system in Biblis. Conventional electricity generation: growing significance of gas as a source of energy. The option of using coal as a source of energy will also vanish in the foreseeable future. All Building the storage infrastructure required for a nationwide supply of green electricity is a relevant RWE core markets have firm legal exit dates. The United Kingdom has set its sights on task that will take decades, not years to accomplish. Therefore, power stations capable of the earliest exit year, which is 2024. Aberthaw B, the last RWE hard coal-fired power plant in offsetting fluctuating wind and solar power production will remain necessary for the operation there, was shut down early in March 2020. foreseeable future. With our conventional generation capacity, we are making an indispensable contribution to the reliable and tailored supply of electricity in our core In the Netherlands it will be forbidden to generate electricity from coal from 2029 onwards. markets Germany, the Benelux region, and the United Kingdom. Our gas-fired power For older assets, the ban comes into effect five years earlier. This has grave consequences stations, most of which are state-of-the-art, are especially well suited to partner with for our Amer 9 (631 MW) and Eemshaven (1,580 MW) power plants, which were initially renewable energy because they emit little carbon dioxide and can react quickly to load designed to run on hard coal only. Thanks to the state’s support, we co-fire biomass in both fluctuations in the grid. Another advantage of gas-fired power stations is that they can be these stations now. By the end of last year, this fuel accounted for 80 % of generated retrofitted to run on zero-carbon fuel, e. g. green hydrogen. capacity in Amer 9 and 15 % in Eemshaven. To continue operating the stations, we would In terms of generation capacity, gas is already our main conventional source of energy, and Eemshaven. This is possible technically, but so far state subsidies have only covered the its share of our power plant portfolio is expected to increase further. Currently, however, new additional cost of achieved levels of biomass co-firing, amounting to 80 % and 15 % for the builds are usually uneconomical, unless they receive guaranteed payments under the two stations, respectively. To date, there have been no prospects of an increase in these German Combined Heat and Power Act or as a result of invitations to tender from the funds. have to increase these shares to 100 % by the end of 2024 at Amer 9 and 2029 at 25 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information In Germany, in mid-2020 the Lower and Upper Houses of Parliament passed the Coal fundamental structural change. We intend to play our part in shaping this change and help Phaseout Act, on which we report in detail on pages 37 et seq. The new law envisages to ensure that the energy industry continues to have a major role in the region. Some gradually switching off all of the country’s coal power plants by 2038. The Act contains a recultivation land is very well suited for the expansion of renewable energy. Three RWE wind detailed exit roadmap for Germany’s lignite-fired power stations, whereas shutdowns of farms are already located there. We also intend to continue developing our power plant hard coal power plants will be decided via auctions. In the first few years, all the lignite sites. For example, there are plans to build an innovation, technology and commercial park capacity reductions will be implemented by RWE. At the end of 2020, we shut down the first in Frimmersdorf and the surrounding area. At the Weisweiler site, within the scope of an EU 300 MW unit in the Rhenish lignite mining region. We will take a further 2.5 GW of generation project, we are looking into the possibility of capturing geothermal heat, which could be fed capacity offline in 2021 / 2022, and just operate our three state-of-the-art 1,000 MW into the district heating network of the greater Aachen area. In addition, we will thoroughly blocks from 2030 onwards. Subject to approval from the European Commission, the explore Power-to-Gas technology at the Niederaussem Innovation Centre. Since 2013, German government will pay us €2.6 billion in compensation for our early exit from lignite. our research and development activities at the Centre have involved producing fuel and However, the financial burden we will actually incur is much higher than this. We nevertheless feedstock for the chemical industry from hydrogen and carbon dioxide obtained by believe the Coal Phaseout Act is acceptable, as it provides planning certainty for our lignite electrolysis. business. To further limit our exposure to economic risks in coal-fired power generation and make RWE’s core business. It forms the economic link between the elements of our value chain, faster progress en route to becoming carbon neutral, we entered the Ibbenbüren B and the regional markets and the various energy commodities. It is overseen by the Group Westfalen E power stations in the first hard coal shutdown auction held by the German Network Agency (see page 44). Both stations won a remuneration contract and stopped operating at the end of 2020. On condition that the German Network Agency approves the company 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, Beijing and Tokyo. Another of the closure of the two power plants, we will not produce electricity from hard coal in Germany Group company’s activities consists of marketing the electricity from RWE power stations Supply & Trading: commercial hub for the generation business. Energy trading is part of any longer. and procuring the fuel and emission allowances required to produce it. The objective here is to limit price risks. On top of that, RWE Supply & Trading is in charge of the commercial The coal phaseout poses major social and operational challenges, mainly relating to our optimisation of our power plant dispatch, the earnings of which go to our generation lignite business. For example, we have to end our opencast mining activities in Hambach companies. Companies outside of the RWE Group can also benefit from the expertise of our early, while maintaining Hambach Forest, which will be extremely expensive. Furthermore, we trading business. They are offered a wide range of products and services, running the gamut are forced to implement major layoffs. The state will provide subsidies for the affected from traditional energy supply contracts and comprehensive energy management solutions employees, including an adjustment allowance. However, we will also pay for some of the to sophisticated risk management concepts. redundancy measures ourselves. The Rhenish lignite mining area will be subjected to 26 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information Intermediary trading and storage of gas harbour additional earnings potential. Another Attractive investment portfolio increases financial strength. RWE’s business operations string to RWE Supply & Trading’s bow is the gas business. This is an area in which the are supplemented by a portfolio of investments in energy companies, which we believe will company aims to establish itself as a leading European intermediary. The company already be a reliable source of substantial income. These are primarily the stakes in Amprion supplies gas to numerous companies inside and outside of the RWE Group. To this end, it (25.1 %), KELAG (37.9 %) and E.ON (15 %). Our interest in E.ON is solely of financial enters into long-term supply agreements with producers, organises gas transportation by importance to us. We are currently using this investment and our claim for compensation for booking pipelines and optimises the timing of deliveries using leased gas storage facilities. the early exit from lignite against the federal government to fund the mining provisions. The greater the size and diversification of the procurement and supply portfolios, the Conversely, we have strategic goals in respect of our stake in KELAG. RWE and KELAG’s greater the chances to commercially optimise them. RWE Supply & Trading also concludes co-shareholder, the Austrian state of Carinthia, have a partnership aiming, among other transactions involving liquefied natural gas (LNG). The main objective is to take advantage things, to strengthen the company’s role as a centre of excellence for run-of-river power of differences in price between regional gas markets which are not connected via pipelines. stations. As part of the asset swap with E.ON, we received the gas storage facilities of our former RWE AG’s management system. Ensuring sustainable growth in shareholder value is at the subsidiary innogy: five in Germany with a total capacity of 1.6 billion cubic metres and six in heart of our business policy. To manage the Group’s activities, RWE AG deploys a groupwide the Czech Republic with a volume of 2.7 billion cubic metres. We report income from the planning and controlling system, which ensures that resources are used efficiently, management of these assets in the Supply & Trading segment. For regulatory reasons, we and provides timely, detailed insight into the current and prospective development of have to keep the storage business legally independent of our gas trading and gas sales the company’s assets, financial position and net earnings. Based on the targets set by activities. The owners and operators of these storage facilities are the Group companies the Executive Board and management’s expectations regarding the development of RWE Gas Storage West and RWE Gas Storage CZ, which offer their market participants the business, once a year we formulate our medium-term plan, in which we forecast the storage services at reasonable non-discriminatory conditions. Their customers use the development of key financial indicators. This plan contains the budget figures for the storage to profit from sudden and seasonal changes in gas prices. However, only small following fiscal year and planned figures for the years thereafter. The Executive Board margins can currently be achieved in the storage business. This holds true especially for the submits the plan to the Supervisory Board, which reviews and approves it. During the fiscal German market, which is characterised by excess capacity. However, we are confident that year, we produce internal forecasts based on the budget. The Executive Boards of RWE AG the need for storage and achievable margins will rise over the medium term, in part due to and the main operating companies meet regularly to analyse the interim and annual increasing demand for power plant gas. The use of our facilities to store hydrogen offers financial statements and update the forecasts. In the event that the forecast figures deviate additional earnings potential in the long run. significantly from the budget figures, the underlying reasons are analysed and countermeasures are taken if necessary. We also immediately notify the capital market if published forecasts need to be modified. 27 RWE Annual Report 20201 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information Major key performance indicators used in managing our business are adjusted EBITDA, Sustainability management – more than just reducing emissions. We can only succeed adjusted EBIT, adjusted net income, capital expenditure, and net debt. EBITDA is defined as over the long term if we ensure society’s acceptance by embracing our corporate earnings before interest, taxes, depreciation and amortisation. In order to improve its responsibility (CR). General consensus equates this with matters relating to the environment, explanatory power in relation to the development of ordinary activities, we remove non- society and governance (ESG), meaning that CR goes far beyond the reduction of operating or aperiodic effects: capital gains or losses, temporary effects from the fair greenhouse gas emissions. To optimise our assessment of the expectations which society valuation of derivatives, impairments and other material special items that are shown in has of us, we constantly seek to engage in dialogue with stakeholder groups. These are the non-operating result. Subtracting operating depreciation and amortisation from primarily shareholders, financial partners, employees, politicians, associations, non- adjusted EBITDA yields adjusted EBIT. Adjusted net income is another key operating indicator government organisations and civic initiatives. The stimulus we receive by interacting with for us. We arrive at this figure by correcting net income to exclude the non-operating result, our stakeholders helps us to determine the focal points of our ESG activities. Matters of income from discontinued operations as well as material special items in the financial result great importance to us in addition to reducing our emissions include the health of our staff, and in the income attributable to non-controlling interests. In addition, instead of the actual biodiversity at our sites, the diversity of our workforce and the attractiveness of RWE as an tax rate, which reflects one-off effects, we apply a rate of 15 %, which is oriented towards the employer. We set ourselves specific goals in respect of numerous such issues, measure the expected average tax burden of the coming years. degree to which we achieve them using KPIs, and make the results transparent to the public. The degree to which ESG targets are achieved also has a major effect on the remuneration We primarily use the internal rate of return for evaluating the attractiveness of investment of the Executive Board of RWE AG. projects. The Group’s financial position is analysed using cash flows from operating activities, amongst other things. We also attach special importance to the development of Further information on our ESG goals and accomplishments can be found in our Sustainability free cash flow. It is the result of deducting capital expenditure from cash flows from Report and in the Group’s separate Non-financial Report in accordance with Section 315b, operating activities and adding proceeds from divestments and asset disposals to them. Paragraph 3 of the German Commercial Code. For fiscal 2020, these reports will be Net debt is another indicator of RWE’s financial strength. It is calculated by adding available in April 2021 and accessible at www.rwe.com/en/responsibility-and-sustainability. provisions for pensions and similar obligations, for nuclear waste management, and for the We also report on the assessment by independent rating agencies of our sustainability dismantling of wind farms to RWE’s net financial position. Conversely, provisions for mining strategy and its implementation on our website. For further details, go to damage and the financial assets used to cover them are disregarded. In managing our www.rwe.com/en/ratings-and-rankings. indebtedness, we orientate ourselves towards the leverage factor, the ratio of net debt to adjusted EBITDA in our core business. 28 RWE Annual Report 20201 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.2 Innovation How can wind farms be built in deep waters? What can we do to ensure a carbon- How we are using new technologies for offshore wind expansion. We rank among the neutral supply of electricity during lulls in the wind and periods of darkness? What world’s leading companies in offshore wind power and are looking for ways to expand our options are there to make environmentally sensible use of carbon dioxide? We at RWE reach. The aim of some of our current R & D projects is to identify the most competitive want to provide convincing answers to such questions. Last year, we worked with floating foundation technologies. This would enable us to venture into entirely new wind numerous partners in industry and science to launch or forge ahead with more than power territories. 200 innovation projects. Most of our ventures were primarily dedicated to achieving one goal: master the challenges of the energy transition with innovative solutions. The foundations of offshore wind farms are typically built on the seabed. True to the principle: the deeper the water, the more robust the structure needs to be in order to withstand the elements. This necessitates more building materials, which, in turn, causes Research and development at RWE: solutions for a sustainable energy system. RWE is project costs to rise. Therefore, wind turbines are generally only profitable in waters with a innovative in many ways. We are motivated both by a desire to remain competitive in an maximum depth of 60 metres. However, in order to harness the potential of wind energy ever-changing environment as well as a passion to be a driving force of this change. With more effectively, companies are working on concepts for floating wind turbines. They are the help of our innovation projects, we are looking to develop solutions that help us advance mounted on a float made of steel or concrete, which is secured to the seabed using mooring the utilisation of renewable energy, expand electricity storage, become involved in large- lines and anchors. This opens up the possibility of deploying wind turbines in deeper waters, scale hydrogen production, and help build a circular economy in which sensible use is made e.g. off the coasts of Asia, the Americas or the Mediterranean region as well as in parts of of carbon dioxide. the North Sea. According to WindEurope, the European wind industry association, in about 80 % of all sea areas where wind speeds are suitable for electricity generation, the ocean is Our more than 900 patents and patent applications, based on about 250 inventions, are simply too deep for conventional foundation designs. We are currently involved in testimony to the importance we ascribe to research and development (R & D). Last year, we demonstration projects for three different types of floating foundations with the objective of worked on 205 R & D projects. Around 390 of our staff were solely dedicated to these identifying the most viable of these technologies. activities or contributed to them in addition to performing their normal tasks. In such ventures, we often work with other companies or research institutions, meaning we generally One of the three demonstration projects we are working on is TetraSpar. It consists of a only bear a portion of the project costs. This is reflected in the RWE Group’s operating R & D tubular steel support structure which is kept stable in the water by a keel. As the support spending which in 2020 amounted to €20 million (previous year: €21 million). structure has a modular design, its individual parts can be prefabricated at different On the following pages we present a small selection of our current innovation projects. Technologies from Denmark, and Japanese power utility TEPCO. We finished assembling the They illustrate the range of challenges we are facing in light of the energy transition and first TetraSpar base in the Danish port of Grenaa in October 2020. It was placed in storage demonstrate the creativity with which we are tackling these issues. for the winter and is scheduled to be launched in the spring of 2021. We will then mount locations, which is cost-effective. We are working on this project with Shell, Stiesdal Offshore 29 RWE Annual Report 20201 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information a 3.6 MW wind turbine on the float at the quayside, after which tugboats will take the entire is also used in bridge building. The floating platform weighs approximately 10,000 metric structure to the test site ten kilometres off the Norwegian coast near Stavanger, where it will tons with its base approximately 20 metres below sea level. The project focuses on be attached to the seabed 200 metres below by means of three anchor chains and then evaluating the floating technology in regard to environmental factors and analysing how connected to the grid via a cable. Power generation is scheduled to start in the summer of offshore wind can coexist with ocean shipping. The project is in the development stage. 2021. The floating turbine will be equipped with a large number of sensors to measure This year, we plan to select a turbine and start negotiations with construction companies. whether its behaviour in real-life conditions is in line with our predictions based on calculations and tests. How we intend to harvest high-altitude winds. For several years, RWE has been exploring how to harness the fairly strong and steady high-altitude winds to produce electricity. The second project is DemoSATH, in which we are working with the Spanish company Saitec Airborne wind energy (AWE) systems offer huge potential for applications in this area. AWE Offshore Technologies on the development and construction of a floating platform for a systems consist of a flying device, a tether and a ground station. The flying device is usually 2 MW wind turbine in the sea near Bilbao, in northern Spain. The project is based on Saitec’s a version of a power kite, such as that used for kite surfing, or a fixed-wing construct similar SATH (swinging around twin hull) technology using a catamaran-like float made of pre-cast, to that of a small aircraft. They can both operate at heights of up to 500 metres. Power is post-tensioned concrete elements. The floating platform can freely rotate around a single generated as the device manoeuvres crosswind. This is done either in the sky using onboard point of mooring, depending on wind and wave directions. The DemoSATH prototype turbines or on the ground as the tether unwinds a winch which drives a generator. including its turbine will be assembled on a quayside in the port of Bilbao, before being towed to its mooring point at a test site in the Atlantic, two kilometres from the Basque As part of a collaborative venture with SkySails Power, we acquired an AWE system rated at coast, where the water is around 85 metres deep. The floating platform will be held in place up to 200 kW from the Hamburg-based company and want to operate it during a three- using hybrid mooring lines consisting of chains and synthetic fibre ropes. In the project year research and development period. Concurrently, we are developing a test site for AWE schedule, three-and-a-half years are allocated for planning, construction and test systems in Ireland with a view to testing further prototypes and concepts, including a operation. After some delays due to COVID-19, the wind turbine is expected to go into 150 kW unit from our Dutch partner Ampyx Power. The EU has committed to fund this service in summer 2022. project. We are confident that the new technology will establish itself as a useful supplement to traditional wind energy generation methods as AWE systems have advantages over In the third project, New England Aqua Ventus, we are collaborating with the University of conventional wind turbines in terms of material usage, maintenance requirements, capacity Maine and Diamond Offshore Wind, a subsidiary of Mitsubishi Corporation. The aim is to utilisation, noise emissions and casting shadows. Furthermore, they can be used flexibly at deploy a 10 MW floating wind unit in the Gulf of Maine along the eastern coastline of the various locations. Based on our assessment, commercial operation of MW-class airborne U.S. by the end of 2023. The unit will feature the University of Maine’s patented floating hull wind energy systems will be possible in the coming decade. technology consisting of modular concrete components with glued joints – a technique that 30 RWE Annual Report 20201 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information How we are forging ahead with green hydrogen production. The more electricity Another initiative harbouring substantial potential is AquaVentus. The idea behind it is to generation switches to the wind and sun as energy sources, the more important energy produce hydrogen offshore using electricity from offshore wind farms and transport it via storage becomes in order to ensure the availability of electricity when needed, independent pipelines to onshore demand hotspots. The island of Heligoland, which is situated in the of the weather. Two alternatives exist to provide power storage to the necessary scale: German North Sea, acts as a hub to which the hydrogen produced by offshore wind turbines high-capacity batteries and hydrogen produced from green energy, which can be converted is transported through pipelines. The Port of Heligoland is already a logistical centre for the back to electricity on demand. The added advantage of hydrogen from zero-carbon operation of offshore wind farms. Initially, the hydrogen will only be used to meet the island’s techniques lies in its versatility: it can be used not only to store electricity but also to needs. Once production volume increases, the hydrogen will be forwarded to the mainland, decarbonise industrial processes and modes of transport which cannot be electrified. We first via tanker and then via a pipeline. Our partners in AquaVentus include Gascade, are involved in current initiatives for the expansion of hydrogen infrastructure focusing on Gasunie, Shell and Siemens. A pilot project is being conducted to build two 14 MW wind these hydrogen applications. RWE is working on a large number of hydrogen projects in turbines in the coastal waters of Heligoland and integrate an electrolyser in each of their Germany, the Netherlands and the United Kingdom. The following passages present bases. If the project stays on schedule, the turbines could start operation in 2026. In the four projects that could contribute to the northwestern German / Dutch region turning long run, electrolysers with a total capacity of 10 GW could be installed in the North Sea into a hydrogen hub. We also report on this and further major hydrogen undertakings at through to 2035. This would be enough to produce up to 1 million metric tons of green www.rwe.com/hydrogen. hydrogen every year. One of the first hydrogen initiatives spanning several industries in Germany is GET H2. One of our most important hydrogen projects outside Germany is Eemshydrogen, based at In addition to RWE, BASF, BP, Evonik, Nowega, OGE, ThyssenGas and Uniper, a host of our Eemshaven power plant site in the Netherlands. This is the projected home of an additional companies and scientific institutions are participating in the project. GET H2 electrolyser powered by electricity from our neighbouring Westereems onshore wind farm. covers the entire hydrogen value chain, from production and transport to usage. The The plant’s initial capacity has been set at 50 MW, although future increases in local wind long-term objective is to build a nationwide hydrogen infrastructure in Germany. Under the power capacity and hydrogen demand could enable capacity to be ramped up gradually. initiative, we have joined forces with several partners to launch the GET H2 Nukleus project. We intend to transport the hydrogen via repurposed gas pipelines, store it in a salt cavern if RWE’s role is to install and operate an electrolyser at our Lingen power plant site, with which necessary, and then deliver it to major customers. Talks with companies participating in the we can use electricity from wind farms to split water into hydrogen and oxygen. The planned development of hydrogen infrastructure and with potential off-takers in the nearby Delfzijl capacity is 100 MW. This would make the unit much bigger than any other in operation in industrial cluster are already underway. Current plans envisage the electrolyser being Germany. It is envisaged that the green hydrogen will be transported via repurposed gas commissioned in 2024. pipelines to the northern Ruhr area where it can be used by refineries and chemical parks. Production and transport of this hydrogen could begin as early as the end of 2023. This NortH2 is another project planned in the north of the Netherlands. The objective is to turn would lay the cornerstone for gradually expanding public hydrogen infrastructure. In the region into a hub for supplying northwestern Europe with green hydrogen. A system addition, the project partners aim to make electrolysis technology ready for mass consisting of offshore wind farms, electrolysers, gas storage facilities and pipelines is production by using it in large-scale plants, thereby reducing the future cost of green expected to be set up for this purpose. NortH2 was launched in early 2020 by Gasunie, hydrogen production. Groningen Seaports and Shell. Equinor and RWE started contributing their expertise to the 31 RWE Annual Report 20201 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information undertaking in December. The partners plan to build 4 GW of electricity generation and In our second battery project – Lazarus – we are seeking to leverage an especially electrolysis capacity by 2030, pushing up this figure to over 10 GW by 2040. The end game affordable and sustainable storage solution with pre-used lithium-ion batteries from is therefore of a similar order of magnitude as the German neighbour project AquaVentus. electric vehicles. The advantage in this respect is that these ‘second-life batteries’ can be A feasibility study will clarify whether the NortH2 project can be carried out as planned. If the sourced affordably and often still have more than 70 % of their original storage capacity. study has a positive outcome, the partners intend to start developing the project in the Extending their life also makes sense from an ecological standpoint, given the greenhouse second half of 2021. gasses emitted during their production. Our long-term plan is to combine a number of these batteries to form a large-scale storage system. Since August 2020, we have been working How we plan to use batteries to ensure grid stability. Alongside hydrogen technology, with a partner from the automotive sector on a pilot plant which we intend to use in the electrochemical storage is an indispensable building block of climate-friendly energy supply. balancing power market. This presents us with the technical challenge of managing the We have operated a 7 MWh battery storage facility next to the Herdecke pumped-storage variety of degradation levels in second-life batteries. In Project Lazarus, we will explore how power plant on the Ruhr river since the beginning of 2018. Three freight containers, to operate our system reliably despite this. equipped with a total of 552 battery modules, serve as the beating heart of the unit. Drawing on experience gained, we have initiated further battery storage projects, two of How we are turning carbon dioxide into fuel. A complete decarbonisation of industrial which we will present below. processes will be all but impossible in the coming decades. So whether Europe meets its target of carbon neutrality by the middle of the century will essentially depend on how we Panta.rhei is the first such project: at the new RWE campus in Essen, we have been deal with the carbon dioxide that is unavoidably emitted during manufacturing processes. developing a redox flow battery since May 2020. What is unique to this technology is that it One option is to store the carbon dioxide below ground, preventing it from entering the stores electric energy in chemical compounds that are dissolved in a liquid. This explains atmosphere. However, the more sensible alternative is capturing the carbon dioxide, e. g., why it is also referred to as a ‘liquid battery’. Our pilot plant has a storage capacity of by combining it with green hydrogen and turning it into chemical products such as plastics. 390 kWh. When fully charged, it can deliver 120 kW for more than three hours. We plan to We have been working on eco-friendly ways to use carbon dioxide for over ten years now. harness its full potential this year. We expect to gain valuable experience from the Panta.rhei Our research is based on the carbon dioxide from our pilot plant at the Niederaussem project that will help us operate redox flow batteries reliably. Our test facility will initially be Innovation Centre in the Rhenish coal mining region. Together with BASF and Linde, we used in the balancing power market to stabilise the grid. This is because batteries can react to changes in grid frequency within a matter of seconds. If the test facility proves itself, we will investigate further applications. For instance, we could use liquid batteries in the electricity wholesale market and take advantage of differences in price resulting from fluctuations in feed-ins of wind and solar power, for example. have been developing one of the world’s leading technologies for what is known as CO2 scrubbing. This technique is used to separate carbon dioxide from the flue gas of a power station or chemical plant, before liquefying it and making it available for recycling. Our CO2 scrubbing demonstration unit has already proven its capabilities during years of extensive testing. Since 2009, it has completed more than 85,000 operating hours, achieving carbon capture rates of up to 98 %. We use the carbon dioxide to produce 32 RWE Annual Report 20201 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information synthetic fuels and raw materials that can be used by the chemical industry, replacing fossil After completion of ALIGN-CCUS in November 2020, the pilot plant remained in operation. fuels such as oil or natural gas. The resulting fuels and materials therefore hold great We now use it for the TAKE-OFF project, which was launched in early 2021 and is also potential for industry and transport. Together with partners, we have already launched half a backed by the EU. We are working with nine partners from six countries on TAKE-OFF. The dozen projects to convert carbon dioxide. All have been approved for funding by either the aim is to keep developing the available technology to produce aviation fuel based on DME EU or the German Ministry of Economic Affairs and Energy (BMWi), among others. Two of these projects, MefCO2 and ALIGN-CCUS, have already successfully run their course, providing us with the foundation for a series of new R & D initiatives due to start in 2021. In the MefCO2 project (methanol fuel from carbon dioxide) we have produced methanol using carbon dioxide and hydrogen. The hydrogen, in turn, was produced by electrolysis and methanol. In our NRW-Revier-Power-to-BioJetFuel project, we are also researching whether we can use existing methods on an industrial scale to produce eco-friendly aviation fuel from hydrogen and carbon dioxide. We assume that politicians are more likely to promote the use of green kerosene for aviation before green diesel for trucks and ships. This should make the results of this project interesting from an economic point of view. using water and electricity. A wide variety of chemical products are based on methanol, one Detailed information on these projects and our other R & D ventures can be found at of the most commonly manufactured chemicals in the world. The clear liquid can also act as www.rwe.com/innovations. a long-term storage medium for hydrogen. We are leveraging this discovery to power a factory vehicle, for example. We equipped the electric car with an additional fuel cell in order to increase its range and be able to charge while driving. Here, methanol is used as a hydrogen source. The fuel cell charges the vehicle battery with the energy released when the hydrogen reacts with oxygen and pure water is produced. In the future, we want to explore additional ways of using methanol as a fuel. A total of 30 industrial enterprises and research institutions from five European countries were involved in ALIGN-CCUS. The German Ministry of Economic Affairs and Energy (BMWi) and the European Union committed funds to the project. With ALIGN-CCUS, we have demonstrated how an entire value chain, from capturing and using carbon dioxide to storing it, can be designed. For this purpose, we converted carbon dioxide and hydrogen into dimethyl ether (DME). DME is a liquefied gas, similar to propane or LPG (autogas) and is used as a hairspray propellant, for example. DME, just like LPG, can be used to power cars. It burns like diesel but is low in both soot and nitrogen oxide, making it a cleaner option. The deciding factor here is that we also produce the necessary hydrogen ourselves – from water and green electricity. In Niederaussem, we commissioned a pilot plant in early 2020, allowing us to produce 50 kilogrammes of DME a day using carbon dioxide and hydrogen. We initially used the DME as fuel for a suitably converted diesel generator to produce peak-load electricity. 33 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.3 Business environment Energy policy continues to centre on climate protection. The EU intends to enshrine an The legislative initiative also paves the way for raising the 2030 target for reducing ambitious emission reduction goal for 2030 in law. At the end of 2020, the European greenhouse gas emissions. The previous goal was to reduce greenhouse gas emissions by Council announced that it was in favour of scaling back greenhouse gas emissions 40 % compared to 1990. The March 2020 draft law proposed a decline of 50 % to 55 %, by at least 55 % compared to 1990. The EU aims to spur the creation of a more subject to a comprehensive impact assessment. Once the results of the assessment were environmentally compatible economy. One goal is to better couple the electricity, heat, published in September, the Commission set the target at no lower than 55 %. However, the transportation and manufacturing sectors while also creating a European hydrogen European Parliament did not feel that the measures went far enough. In early October, a economy. The European Commission has specified in strategy papers how this can be majority of delegates voted for a 60 % decrease of greenhouse gas emissions. Also in accomplished. A foundation has also been laid for increased climate protection in our October, the European Council also gave the go-ahead for the climate law, although it home market, Germany. In mid-2020, policymakers established the legal framework for initially omitted the interim goal for 2030. At the EU Summit in December, the heads of state phasing out coal-fired electricity generation. This has given us increased planning and government agreed on a reduction of at least 55 %. Representatives of the Council and certainty for our lignite business. We also welcome the state’s assistance in cushioning Parliament must now decide which target is ultimately adopted during formal trilogue the social impact of necessary redundancies. meetings, in which the Commission is also involved. The negotiations had not been Political environment concluded when this review of operations was prepared (early March 2021). The climate law will serve as the foundation for the Green Deal, which envisages far-reaching reforms to industry, energy supply, transport and agriculture. To this end, the Europe seeks to become carbon neutral by 2050. In March 2020, the European European Commission is planning comprehensive legislative changes and a number of Commission presented a draft for a European climate law. It was the first legislative different programmes in order to provide for the accelerated expansion of renewable proposal for the implementation of the EU’s Green Deal, which the President of the energy, a new strategy for the industrial sector, import barriers for goods produced using European Commission Ursula von der Leyen had declared to be of the utmost priority during processes that are harmful to the climate, and a strategy for clean transportation, among her five-year term in office (see page 42 of the 2019 Annual Report). The objective is to other things. Regions which are most affected by these policy measures will be supported by make the EU goal of carbon neutrality by 2050 legally binding. EU institutions and member way of a Just Transition Fund. The EU is also planning to reform the European Emissions states would then be obliged to establish a framework for reducing net greenhouse gas Trading System and, in doing so, will probably considerably reduce the number of certificates emissions to zero by the middle of the century. By 2023, the Commission will conduct an placed on the market. The extent of the reduction is likely to depend on the emissions initial assessment and announce whether EU and national measures are mutually reduction target agreed upon by the Council and the Parliament compatible and fit for purpose. A similar evaluation of the EU’s progress is planned for every five years thereafter. 34 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information EU creates sustainability classification system for economic activity. In June 2020, In an integrated energy system, hydrogen can be used to support the decarbonisation of the European Parliament and the Council of Ministers introduced the Taxonomy Regulation industry, transport, power generation and buildings in Europe. The EU’s hydrogen strategy as a tool to help determine when to classify economic activity as sustainable. Players on the addresses how to unlock this potential by way of investment, regulation, market creation, financial market, e. g. investment funds, labelling a financial product environmentally and innovation. The primary goal is to develop a green hydrogen economy, which largely sustainable, will have to report the share of green investments in their portfolio as defined by sources its hydrogen electrolytically using renewable energy. By 2024, 6 GW of electrolysis the Regulation. Businesses will also be faced with stricter disclosure requirements. capacity is envisaged, which would enable up to 1 million metric tons of green hydrogen to Companies obliged to prepare non-financial reports will have to provide more detailed be produced per year. The Commission’s roadmap seeks to make green hydrogen a core information on the sustainability of their business activities. The EU hopes that the increased component of the integrated energy system by as early as 2030. Then the EU should have transparency will provide stimulus for investments that make a contribution to the Green electrolysers with a total capacity of at least 40 GW, with annual production reaching up to Deal. The Taxonomy Regulation entered into force on 12 July 2020. As it is a central piece 10 million metric tons of hydrogen. The EU expects green hydrogen production technologies of legislation, there is no need to translate it into national law. The publication duties apply to have matured by this point, allowing for large-scale rollout over the following two decades. from 2022 onwards. However, the European Commission is yet to specify the criteria for In order to give this additional momentum, the Commission founded the European Clean determining the economic activities meeting the sustainability principles set out in the Hydrogen Alliance, a body comprised of representatives from industry, national and local Regulation. public authorities, civil society and the European Investment Bank. RWE is a member of the alliance, which has been tasked with driving investments to expand hydrogen infrastructure, EU seeks to integrate energy system and drive expansion of hydrogen economy. In among other things. July 2020, the European Commission published strategy papers on coupling the electricity, heat, transport and manufacturing sectors (integration of the energy system) and on German government adopts national hydrogen strategy. The German government hydrogen. They contained a variety of goals and measures aimed at enabling the EU to published its hydrogen plans in June 2020 – one month ahead of the EU. Germany’s achieve its target of carbon neutrality by 2050, as set out under the Green Deal. The national hydrogen strategy affirms the country’s intent to establish hydrogen technologies European Commission’s strategy to integrate the energy system aims to harness potential as core elements of the energy transition and to create the necessary regulatory framework emission reductions and increase efficiency. An integrated system envisages a world in to ensure large-scale rollout. The plan is to build a strong home market in Germany and to which vehicles are powered by solar panels, homes are heated by district heating from focus on green hydrogen, produced using renewable electricity, with the strategy paper factories, and manufacturing plants are operated with hydrogen produced with offshore stating that only this option is truly sustainable in the long term. The German government wind energy, to list a few examples. The European Commission sees increasing the share of envisages electrolysers with a total capacity of 5 GW being built for the production of green electricity in final energy consumption as being key to sector coupling, i. e. increasing hydrogen by 2030, in addition to the required generation assets, with offshore wind playing utilisation of heat pumps and electric vehicles, for example. Sectors which are likely to a major role. The objective is to have 10 GW of electrolysis capacity by 2040 at the latest. struggle with electrification will see a push for clean fuels, such as green hydrogen. To this The large-scale rollout of hydrogen technology in Germany will be supported with €7 billion end, the Commission intends to develop a new classification and certification system for in subsidies. It is envisaged that an additional €2 billion will be set aside for international zero and low-carbon fuels. In addition, it is planning support programmes and partnerships. The federal government also intends to give electricity used to produce green comprehensive adjustments to the European regulatory framework. hydrogen preferential treatment in terms of taxes, levies and surcharges. This electricity has 35 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information already been exempted from the surcharges under the Renewable Energy Act and the In November 2020, the Lower and Upper Houses of Parliament passed two further laws to Combined Heat and Power Act as well as the offshore grid apportionment as part of the drive the expansion of renewable energy: the Offshore Wind Energy Act and the Investment reform of the Renewable Energy Act, on which we report below. Acceleration Act. The first of the two laws envisages the 2030 expansion target for offshore wind power increasing from 15 GW to 20 GW, with this figure rising to 40 GW by 2040. The German government establishes more favourable subsidy conditions for renewables. tendering model will remain largely unchanged. In Germany, wind farms are subsidised via In December 2020, the German Upper House and Lower House passed a reform of the premiums. If the market price realised by the operators for their electricity is below a German Renewable Energy Act, which entered into force on 1 January 2021. According to reference figure, the premium offsets the difference. The reference price is determined on the law, all electricity generation in Germany must become carbon-neutral by 2050. The the basis of a competitive tender process, in which participants with the lowest bids are target for 2030 is for renewables to account for 65 % of electricity consumption. To selected. One important change is that permissible bids are now subject to higher ceilings. facilitate this, legislators have set new expansion targets: they envisage photovoltaic and The upper limit will be set at €73 / MWh in 2021 and at €64 / MWh and €62 / MWh in the onshore wind capacities growing to 100 GW and 71 GW by 2030, corresponding to a rise two following years, respectively. If the cap had not been raised, the maximum allowable bid of around 85 % and 30 %. The law provides for a number of regulations, many with a focus in the next call for tenders would have been limited to the lowest successful bid in the on making the operation of solar panels more attractive. The amendment also brings previous auction of 2018, which was €0. In addition, moving forward, developers of wind improvements for wind farms. For example, operators of new wind farms will be able to give energy projects will pay a higher penalty if they fail to make a final investment decision local communities a share of the electricity revenue in order to increase local value added 24 months before the grid connection completion date. This lowers the likelihood of and thus raise acceptance. Old wind turbines, which have come to the end of their 20-year speculative zero-subsidy bids, fuelled by positive market forecasts. subsidy period, will receive a follow-up subsidy until 2022, subject to certain conditions. However, this measure still needs to be approved by the European Commission under state The Investment Acceleration Act, passed in tandem with the Offshore Wind Energy Act, aid law. In order to reduce the strain on electricity consumers, the legislator is limiting the aims to decrease administrative and legal barriers to infrastructure expansion. It includes renewable energy surcharge to 6.5 cents / kWh for 2021 and 6.0 cents / kWh for 2022. The changes to court proceedings as well as environmental and general administrative government will fund the shortfall from its budget. As mentioned above, electricity used to procedures, including regional planning procedures. In accordance with the law, objections produce green hydrogen will be exempt from the renewable energy levy and further and actions for annulment by third parties disputing the approval of an onshore wind surcharges in the future. turbine with a total height of more than 50 metres no longer have a suspensive effect – allowing projects to progress. Furthermore, legal disputes concerning onshore wind farms of this size can now be fast-tracked through an expedited appeals process. The law provides for higher administrative courts to have jurisdiction in the first instance. 36 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information UK government publishes energy white paper for climate protection. In December 2020, US government improves funding conditions for renewables. In the USA, policymakers the UK government published its energy white paper, setting out how it envisages the have increased the tax incentives for investments in renewable energy assets. Additionally, country’s future climate protection trajectory. The UK is intent on achieving net zero deadlines for incentive claims have been extended to protect investors from financial losses emissions by 2050. The paper contains a variety of measures to pave the way for this vision. from construction delays due to the coronavirus. In the United States, renewable energy Particular focus has been given to offshore wind expansion: the UK government aims to projects are subsidised using a two-pronged approach: production tax credits (PTCs) or quadruple capacity to a total of 40 GW by 2030. It further envisages a rise of climate- investment tax credits (ITCs). PTCs grant a tax benefit per unit of electricity for a period of friendly hydrogen production capacity to 5 GW by the same year. A national scheme ten years. ITCs are based on the value of the investment. RWE’s onshore wind turbines are focused on achieving the climate targets for 2050 will replace the EU Emissions Trading typically subsidised with PTCs. Projects launched in 2016 / 2017 would have needed to be System. Projects for capturing and storing or using carbon dioxide are to receive £1 billion completed in 2020 / 2021 – i. e. four years later – in order to be eligible for the full subsidy. in funding over the course of the decade. In light of the coronavirus pandemic, the US government extended this deadline by a year. RWE also benefits from this as there were delays in the completion of a number of wind Poland establishes support scheme for offshore wind. The Polish government has farms due to COVID-19. In addition, the US government also decided to extend ITC created the legal framework for subsidies for wind farms in the Baltic Sea, with the subsidies for solar investments. New plants, which go into construction in 2021 or 2022, will Parliament passing an appropriate law in January 2021. Poland intends to increase the be granted an investment tax credit of 26 % of the total investment. For plants going into share of renewables in electricity generation from 14 % in 2019 to 32 % in 2030. At the construction in 2023, this figure drops to 22 %. More favourable funding conditions have moment, there are no wind farms off the coast of Poland. However, turbines with a total now also been introduced for offshore wind: projects set to begin construction before 2026 capacity of 10.9 GW are due to be in development or in operation by as early as 2027. The qualify for an ITC of 30 % of the total investment. law envisages a start phase, which will initially subsidise wind farms with a total capacity of 5.9 GW. Plant operators will be awarded contracts for difference which guarantee a fixed German Upper and Lower House adopt regulatory framework for German coal payment for 100,000 full load hours in generation, with a maximum subsidy period of phaseout. On 3 July 2020, the German Upper House and Lower House passed the law on 25 years. If the market price falls below the guaranteed remuneration, the state pays the the reduction and termination of coal-fired power generation and on the amendment of difference. If it exceeds the specified sum, the operators are obliged to make a payment. In other legislation (Coal Phaseout Act). The law is based on recommendations published by the first phase, the subsidies are set administratively. Companies have until the end of the government’s Growth, Structural Change and Employment Commission in January March 2021 to apply for them. After the start phase, the wind farms subsidised through 2019. It provides for a gradual exit from electricity generation from coal by 2038. The Act contracts for difference will be determined in auctions. Tenders for up to 2.5 GW are planned also contains provisions for the continuous monitoring of security of supply and the for both 2025 and 2027. RWE is currently developing the FEW Baltic II offshore wind project introduction of adjustment allowances for older employees working in the coal sector as well in Poland. This project involves building a wind farm with an installed capacity of 350 MW on as an authorisation clause, which enables the federal government to provide electricity Słupsk Bank. FEW Baltic II satisfies the requirements for participating in the first phase of the consumers with financial relief if the coal phaseout leads to an increase in electricity prices. offshore wind subsidy scheme. In addition, the legislator extended and refined the subsidisation of combined heat and power plants. The objective is to encourage retrofits of coal-fired power stations for more climate-friendly electricity generation. 37 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information Legislators have now also established a phaseout roadmap for lignite power plants. RWE will by the state. Furthermore, a coal phaseout collective agreement we signed with the German bear the brunt of initial capacity reductions. We decommissioned the first 300 MW block in Unified Services Trade Union (ver.di) and the German Mining, Chemicals and Energy Trade the Rhenish lignite mining region, Niederaussem D, at the end of 2020. This year, we will take Union (IG BCE) in August 2020 contains provisions that determine what RWE has to do three further 300 MW assets off the grid, with one 300 MW block and two 600 MW units above and beyond the state measures. scheduled for 2022. The Neurath and Niederaussem sites will be most heavily affected by these plans, along with Weisweiler, albeit to a small extent. Furthermore, in 2022, we will The lignite phaseout is flanked by a public law contract between the state and the lignite discontinue briquette production in Frechen and, in turn, the operation of 120 MW in producers. The contract contains a large number of regulations, which relate in particular to electricity generation capacity. Thereafter, we will shut down the remaining capacities at our the implementation of the closures and compensation. This contract will serve to protect Weisweiler power station: one 300 MW unit (2025) and two 600 MW blocks (2028 and the companies’ interests, which, in return, will not assert any further claims in relation to the 2029). The Inden opencast mine, which exclusively supplies Weisweiler with lignite, will then lignite phaseout. Once approved by the Upper House, the contract was signed in early also be decommissioned. We will shut down our last two 600 MW stations in late 2029, 2021. However, the compensations still require approval by the EU under state aid law. one of which will remain on standby for four years to ensure security of supply. From 2030 Irrespective of this, RWE has begun to implement the statutory phaseout plan. onwards, this leaves only our three state-of-the-art lignite blocks at 1,000 MW apiece on the market. The hard coal phaseout is also set out in detail in the new law. At which point each individual power plant will be taken off the grid and how much their operators will be compensated is The closures will have considerable consequences for the opencast mines. More than half determined in an auction process. The law envisages annual tenders from 2020 to 2027. the approved volume of lignite reserves will remain in the ground and Hambach Forest will Operator bids will be subject to specific caps which are set to be lowered from €165,000 to be preserved. Of our three opencast mines in the Rhenish lignite mining region – Inden, €89,000 / MW during the aforementioned period. From 2027 onwards, the law provides for Hambach and Garzweiler – we will only operate the last in the list from 2030 onwards to closures without compensation. If the tenders do not result in enough capacity being supply the remaining assets with fuel. Accordingly, the energy industry’s need for the decommissioned, starting in 2024, power plant operators will be ordered to shut down Garzweiler II opencast mine to remain operational has been enshrined in law via a clause stations without compensation. RWE participated in the first auction, which was held in the added to the Coal Phaseout Act. second half of 2020. Our last two German hard coal power plants – Ibbenbüren B (794 MW) and Westfalen E (764 MW) – placed winning bids. The stations stopped operating in late The lignite phaseout will place a huge financial burden on our company. In accordance with 2020 (see page 44). the law, we will therefore receive compensation in the amount of €2.6 billion, to be paid out in equal instalments over a 15-year period. However, the damage we will actually incur will German government seeks to provide coal regions with up to €40 billion in subsidies. clearly exceed this figure. Our claim for compensation from the state and the majority of our On 3 July, the Upper and Lower Houses of Parliament passed the Structural Development expected losses have already been accounted for in our 2019 consolidated financial Act, which applies to coal mining regions. The law envisages the federal government statements (see page 43 of the 2019 Annual Report). Intended recipients of state providing up to €14 billion in financial support to the lignite mining regions for investments compensation in addition to RWE include the employees affected by the layoffs. Among of particular importance through to 2038. Of these funds, 37 % will go to the Rhenish coal other things, the Coal Phaseout Act provides for adjustment allowances and compensation mining region, in which we are active, with 43 % and 20 % going to the Lausitzer and Central for any disadvantages in relation to statutory pensions. These will be covered German coal mining areas, respectively. The funds can be used by the states, e. g. to invest 38 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information in industrial infrastructure and public transport. The government intends to flank this by supporting the regions through its own measures. A total of €26 billion has been budgeted Market environment for this and earmarked for measures such as the expansion of the rail and road networks as Economic output drops in all of RWE’s core markets. According to preliminary estimates, well as the creation of research hubs. global economic output dropped by 4 % in 2020 compared to the previous year. The coronavirus pandemic and the associated lockdown measures caused many countries’ German government to overhaul compensation for nuclear phaseout. In September gross domestic product (GDP) to slump drastically. Economic experts estimate a GDP 2020, the German Constitutional Court found that the compensation regulations in the decline of about 7 % for the Eurozone. Economic output was not as adversely affected in German nuclear phaseout plan introduced in 2018 had not entered into force. The Court Germany and the Netherlands, our most important markets within the currency union. thus ruled in favour of an appeal submitted by Vattenfall. The proceedings dealt with the 16th amendment to the German Nuclear Energy Act, which specified the approach to Estimates here vary between – 5 % and – 4 %. The USA is likely to have experienced a similar decline. However, the United Kingdom has been hit much harder by the pandemic: based on compensating RWE, Vattenfall, E.ON and EnBW for certain financial losses due to the available data, UK GDP probably shrank by about 10 %. expedited nuclear phaseout. The phaseout had been enshrined in law in 2011 following the Fukushima nuclear disaster. This was the second exit law after 2000. In 2010, the German electricity consumption down by an estimated 4 %. Decreased economic output government had extended the lifetimes of nuclear power stations. After the reactor incident, has also meant lower demand for energy. According to the German Association of Energy it reversed the extension and imposed stricter conditions on the exit. In December 2016, the and Water Industries (BDEW), German electricity consumption in the past fiscal year was Constitutional Court ruled that the power station operators have to be compensated for down 4 % on 2019. Other RWE core markets have also been on the decline. Experts put the certain losses due to the second nuclear phaseout and tasked the state with making the downturn at 2 % for the Netherlands, 6 % for the UK and 3 % for the USA. This development necessary legislative arrangements by mid-2018. Compensation claims were thus ruled was largely attributable to restrictions to industrial output due to COVID-19. The mild admissible for generation contingents that had been approved in the first nuclear phaseout weather also had a minor impact, as less electricity was needed for heating. in 2000, but which could no longer be used due to the decommissioning deadlines introduced in 2011, and for investments that were now worthless and that the power plant Better wind conditions in northern and central Europe. Utilisation and profitability of operators had undertaken based on the lifetime extension introduced in 2010. The state intended to implement these instructions by way of the 16th amendment to the German renewable assets are largely weather-dependent. This is why wind speeds are extremely important to us. In 2020, these were generally higher than the long-term average and often Nuclear Energy Act. However, according to the most recent Constitutional Court ruling, the up on 2019 at our production sites in northern Europe, the United Kingdom, and the amendment never entered into force due to formal errors. Additionally, the Court also found Netherlands. An opposite trend was witnessed in the south of Europe and of the southern that individual provisions, which were dedicated to compensation for unusable generation states of the USA. By and large, wind conditions in Germany, Poland and large parts of the contingents and which could prove detrimental to the affected companies, were USA were normal, with notable changes over 2019 being an exception to the rule. unconstitutional. In accordance with the ruling of the highest court, the legislator is obliged to rewrite the compensation regulations. The German government began talks with the nuclear power plant operators on this subject at the beginning of 2021 (also see page 46). 39 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information Average RWE wind farm utilisation in 2020 Onshore Offshore Declining demand curbs hard coal prices. Hard coal used in power plants (steam coal) % Germany United Kingdom Netherlands Poland Spain Italy Sweden USA 20 34 30 29 23 21 33 33 40 42 – – – – 56 – also became notably cheaper: deliveries to ARA ports (ARA = Amsterdam, Rotterdam, Antwerp) including freight and insurance were settled for an average of US$50 / metric ton (€45) in 2020, as opposed to US$61 / metric ton the year prior. The decline is mainly due to a drop in demand: coal-fired power stations have most recently been underutilised in Europe. The unusually low gas prices, which made gas much more competitive as an energy source than coal, came to bear. Decreased energy demand due to the coronavirus pandemic also caused hard coal usage to contract. Many market participants assume that the market environment for coal-fired power plants will remain challenging, not least due to the relatively high carbon emissions associated with these stations and the correlated cost disadvantages. This assessment was reflected in the development of hard coal forward prices: in the year under review, the 2021 forward (API 2 Index) was quoted at an average of US$58 / metric ton (€51). This is US$12 less than was paid for the 2020 forward in 2019. Weather-driven collapse of natural gas spot prices. The utilisation and earnings of our conventional power plants are heavily dependent on how fuel and emission allowance prices develop. Natural gas, our most important tradable energy source, was characterised by an extremely low price level in the year under review. Quotations at the Dutch Title Despite COVID-19, CO2 emission allowance prices hit record high. An important price factor for fossil fuel-fired power plants is the procurement of CO2 emission allowances. A European Union Allowance (EUA), entitling the holder to emit one metric ton of carbon Transfer Facility (TTF), Continental Europe’s lead market, dropped as low as €3 / MWh in the dioxide, was traded at an average of €25 in 2020. The reference figure for 2019 was also first half of the year, but were able to regain considerable ground during the rest of the year. €25. These prices relate to contracts for delivery that mature in December of the following However, the 2020 average of €9 / MWh was notably lower overall than the previous year’s year. At times, certificate prices dropped substantially due to the coronavirus pandemic. (€14 / MWh). The decrease in demand for heating gas due to the mild winter of 2019 / 2020 In March 2020, they fell to below €16. Decreased industrial output weighed on prices as it and the commensurately high storage levels at the beginning of the year played a resulted in reduced carbon dioxide emissions, driving down demand for emission significant role. Later on, the corona-induced decline in industrial and commercial gas allowances. Over the rest of the year, prices rose to a record €33 in December. The consumption affected the price trend. Forward trading prices also dropped. In the year materialising economic recovery came to bear here. The EU initiative to raise the climate under review, the 2021 TTF forward cost €13 / MWh on average. By way of comparison, target for 2030 also played a role, as it stipulates that the EU significantly reduce the in 2019, the 2020 forward traded at €18 / MWh. number of emission allowances put on the market. Many participants in emissions trading therefore expect a further shortage of available EUAs, despite the economy’s continued carbon dioxide reductions. 40 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information One-year forward prices of base-load electricity on the wholesale market € / MWh (average weekly figures) 2019 forward 2020 forward 2021 forward 2020 electricity forward sales: margins slightly higher year on year. In order to mitigate the risk of short-term sales and price fluctuations, we sell most of our generation forward and hedge the prices for the necessary fuel and emission allowances. Electricity revenue for the period under review was thus greatly defined by the conditions of the forward contracts for 2020, which were concluded in previous years. As we had begun conducting such forward sales quite early for electricity production in our lignite and nuclear plants, which are mainly used to cover base load needs, we were able to achieve higher prices and margins on average for 2020 than for 2019. Sales of electricity from our hard coal and gas-fired stations were subject to a shorter lead time. Here realised prices also rose, but opposing effects were more notable due to the pre-2020 hike in CO2 emission allowance prices. Whereas margins realised for our gas-fired power plants on the forward market were higher overall than in 2019, margins for our hard coal-fired power stations stagnated at a low 80 70 60 50 40 30 2018 2019 2020 level. Germany Netherlands United Kingdom Source: RWE Supply & Trading. Significant decline in wholesale electricity prices. The drop in hard coal and natural gas prices shaped the trajectory of the wholesale electricity markets last year. The decrease in demand for energy triggered by the coronavirus pandemic was another influential factor. In 2020, base-load electricity traded for an average of €30 / MWh on the German spot market as opposed to €38 / MWh in the prior year. In the UK and the Netherlands, spot prices declined from £43 to £35 / MWh (€40) and from €41 to €32 / MWh, respectively. Electricity prices on the forward markets were higher than spot prices. Compared to 2019, however, they were also marked by a significant decline. The 2021 base-load forward cost €40 / MWh on average. The comparable figure for the previous year was €48. One-year forward prices declined from £52 to £44 / MWh (€49) in the UK and from €50 to €40 / MWh in the Netherlands. 41 RWE Annual Report 20201 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.4 Major events We passed further milestones last year. In mid-2020, we completed the asset swap with As part of the asset swap, we transferred our 49 % interest in Slovak power utility VSE to E.ON, which has transformed us into a leading renewable energy company. We also E . ON. We had taken over the VSE shareholding from innogy in 2019 in order to sell it to E.ON made major inroads in the expansion of our wind and solar capacity. To gain even more later on at the same conditions. However, this was subject to the approval of the Slovak traction in this area, we conducted a capital increase and acquired the European government. We received state clearance in mid-2020, enabling the transaction to be development business of Nordex. Furthermore, we discontinued our electricity completed in August. The price of the stake in VSE had been considered in 2019 when generation from hard coal in Germany and the UK. In doing so, we have proven that our settling the payment claims arising from the asset swap with E.ON. climate protection measures go far beyond what is required by law. In the following, we present the material events that occurred in 2020 and the beginning of 2021. We have In December 2020, it was contractually agreed that we would receive from E.ON a 20 % focused on transactions that have not been commented on in detail elsewhere in the stake in the UK offshore wind farm Rampion, which had not initially been considered in review of operations. Events in the fiscal year implementing the asset swap. This will increase our stake in the 400 MW wind farm to 50.1 %, making us the majority owner. We had already received a 30.1 % interest from E.ON in September 2019. We expect to complete the acquisition in 2021. The Rampion wind farm is located off the coast of Sussex and has been operating commercially since 2018. Asset swap with E.ON finalised: RWE takes ownership of innogy’s renewable energy RWE increases financial headroom for renewable energy projects by increasing equity business. At the end of June, we successfully completed our asset swap with E.ON, marking by €2 billion. On 18 / 19 August, we issued 61.5 million new RWE shares to institutional one of the biggest transactions in German industrial history. The swap was agreed in early investors, thereby increasing RWE AG’s capital stock by 10 %. The shares were placed by way 2018 and implemented in two steps once the legal requirements had been met. First, we of accelerated book building under exclusion of subscription rights. Based on the issue price sold our 76.8 % stake in innogy, in exchange for which we received E.ON’s renewable energy of €32.55 per share, we achieved gross proceeds of approximately €2 billion. We intend to business, a 16.67 % shareholding in E.ON and the non-controlling interests in our use these funds to speed up the expansion of renewable energy. The capital increase Gundremmingen (25 %) and Emsland (12.5 %) nuclear power plants from E.ON subsidiary caused the number of RWE shares to rise to 676.2 million. The new and old stock confer the PreussenElektra. These transfers took place shortly after the asset swap was approved by same rights. Despite the increase in the number of shares, the Executive Board of RWE AG the European Commission in September 2019. The second step, which took effect at the maintains its dividend target. Together with the Supervisory Board, it plans to propose a end of the day on 30 June 2020, involved E.ON returning parts of the innogy portfolio to us, dividend of €0.85 per share for the past fiscal year to the Annual General Meeting on i. e. the renewable energy business, the German and Czech gas storage facilities and a 28 April 2021. 37.9 % stake in Austrian power utility KELAG. We had recorded these activities in our Group figures before they were transferred back to us, as they were already assigned to us commercially. Now they belong to RWE also in legal terms. 42 RWE Annual Report 20201 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE acquires European wind and solar projects from Nordex. In November, RWE US wind farms with a net capacity of over 700 MW begin commercial operation. In the purchased the European project development business of wind turbine manufacturer fiscal year that just ended, we commissioned four large-scale onshore wind farms with a Nordex for €396 million. We received a project pipeline of new onshore wind and solar farms total installed capacity of 719 MW in the USA. Peyton Creek (151 MW) was the first to go with a total installed capacity of 2.7 GW. A total of 1.9 GW is located in France, with further online. The Texan wind farm was commissioned in March. Although construction work was ventures in Spain, Sweden and Poland. At the end of 2020, a final investment decision was delayed by Tropical Storm Imelda, the wind farm managed to go online on schedule. Half a reached for four projects in the pipeline, which will result in 76 MW of generation capacity. year later, in September 2020, Cranell (220 MW), also located in Texas, went into Thanks to the Nordex transaction, we have added over 70 employees to our headcount, commercial operation. Cranell experienced slight delays due to the corona crisis. Despite mostly in France, who will develop further projects for RWE in the future. the pandemic, Boiling Springs (Oklahoma, 148 MW) and Raymond East (Texas, 200 MW) were completed before year-end. However, project completion for Scioto Ridge (Ohio, RWE concludes agreements for lease to expand four UK offshore wind farms. Together 250 MW), Cassadaga (New York State, 126 MW) and Raymond West (Texas, 240 MW) was with project partners, we set the stage for an expansion of four wind farms off the coast of delayed to 2021. the UK. We concluded agreements for lease with The Crown Estate, the authority in charge of managing the assets of the British monarch. These contracts allow us to use further RWE sells stake in Humber Gateway wind farm in the North Sea and four wind farms areas neighbouring the Gwynt y Môr (576 MW), Greater Gabbard (504 MW), Galloper in Texas. To increase our financial strength and improve the balance of our generation (353 MW) and Rampion (400 MW) wind farms. This enables existing capacity to be doubled. portfolio, we sold shares in wind farms in the United Kingdom and the USA. In December, Including capacity from the remaining seabed option at Rampion, this could lead to 2.6 GW UK investor Greencoat took a 49 % interest in our Humber Gateway (219 MW) wind farm in additional generation capacity. Based on the shareholding ratios, half of this is allocable located off the coast of East Yorkshire in the North Sea. Humber Gateway has officially been to RWE. Now our goal is to develop these projects rapidly. We expect the approval procedure online since 2015, and we remain the majority owner (51 %) and operator of the wind farm. to take between three and five years. Thereafter, we will participate in auctions for state Also in December, we agreed to divest stakes in our Texan onshore wind farms Stella subsidy contracts and – should we submit a winning bid – we will make the final investment (201 MW), Cranell (220 MW), Raymond East (200 MW) and Raymond West (240 MW). The decisions. The new wind farms could then be commissioned towards the end of the decade. buyers are a subsidiary of Canadian energy utility Algonquin Power & Utilities and Greencoat. Go-ahead for construction of Kaskasi wind farm in the North Sea. In March 2020, RWE With the exception of the Raymond West transaction, these sales were completed in early made the final investment decision to build the Kaskasi wind farm in the German North Sea. 2021. As we will only retain 25 % ownership of the US wind farms, we will stop consolidating It will be located 35 kilometres north of the island of Heligoland. Altogether, its 38 turbines them fully and instead account for them using the equity method. RWE will remain the These two companies will take interests of 51 % and 24 % in the wind farms, respectively. will have an installed capacity of 342 MW, enough to power approximately 400,000 homes. operator. Offshore construction work is scheduled to start in 2021. Based on our current planning, Kaskasi should be fully online by as early as 2022. A novel vibration technique will be used to install the foundations 18 to 25 metres under water. This new method reduces noise emissions that can affect marine fauna and shortens construction time. Another advantage is that Kaskasi will be located between our Nordsee Ost and Amrumbank wind farms, enabling operation and maintenance synergies to be leveraged. 43 RWE Annual Report 20201 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE sells small hydro stations to KELAG. Austrian energy utility KELAG will purchase a RWE stops producing electricity from hard coal in Germany. With our early exit from hard generation portfolio comprising 19 small hydroelectric power plants in France and Portugal coal-fired electricity generation in Germany, we have taken a major step towards improving from us. A corresponding agreement was signed in December 2020. The portfolio has an our carbon footprint. The stage for this was set in the second half of 2020 when we won installed capacity of 65 MW, including several wind turbines with a combined capacity of remuneration contracts for Unit B (794 MW) in Ibbenbüren and Unit E (764 MW) at the 3 MW. The capacity figures are prorated, meaning that they reflect capacity in line with the Westfalen site in Hamm in the first nationwide shutdown auction for hard coal power plants. shareholding ratios. The sale is scheduled to be completed this year. KELAG is a leading Therefore, since 1 January 2021 we may no longer market electricity from our last two hydroelectric power producer and RWE holds a 37.9 % stake in the company. German hard coal power stations. We secured compensation of €216 million in the auction. State-of-the-art gas-fired power plant acquired in the east of England. Early in 2020, that they are not needed to maintain grid stability. Including Niederaussem Block D we cemented our position as a leading generator of electricity from gas in the UK. In (297 MW), which was decommissioned at the end of 2020, we are thus taking a total of February 2020, we bought the King’s Lynn gas-fired power station in Norfolk (eastern 1.9 GW offline right at the beginning of the German coal phaseout. A collective agreement England) from British energy utility Centrica for the equivalent of €113 million. The station ensures that the shutdowns will be conducted in a socially acceptable manner. We will shut down the units as soon as the relevant transmission system operators confirm has a net installed capacity of 382 MW and boasts a high efficiency of 57 %. Its operating mode can be adapted flexibly in response to demand. A capacity market contract secures The hard coal auction called for bids to win state subsidies to decommission 4 GW of power fixed payments for King’s Lynn from October 2020 to September 2035. Recently, the power plant capacity. The deadline for submitting bids was 1 September 2020. Those requesting plant was modernised extensively, which included equipping it with a new gas turbine. the lowest compensatory payment per metric ton of carbon dioxide avoided won contracts. The auction was significantly oversubscribed, and eleven assets with a combined capacity Go-ahead to build a grid stabilisation plant at the Biblis site. Germany will be home to of as much as 4.8 GW submitted winning bids. The invitation to tender was the first of a a new RWE gas power station. We won the invitation to tender by transmission system series of hard coal auctions through which the German Network Agency is implementing operator (TSO) Amprion for the construction and operation of a grid stabilisation plant at the legally mandated coal phaseout. As we were successful with both our German hard the Biblis site. The station will have a capacity of 300 MW and is scheduled to be coal-fired power stations in the first round, there is no need for us to participate in further commissioned no later than October 2022. It will not be available to the open market, auctions. instead operating only on request from the TSO. Its sole purpose will be to help stabilise power grid frequency, making a contribution to security of supply. Welsh Aberthaw B hard coal power plant shut down. We have also stopped generating electricity from hard coal in the United Kingdom. The last station in which we used this fuel, Aberthaw B in Wales, was officially decommissioned at the end of March 2020. The station consisted of three units with a total net capacity of 1,560 MW. Its British capacity market obligations through to the end of September 2021 were transferred to third-party stations or other units within RWE’s power plant fleet. Aberthaw B went into operation in 1971 and has thus contributed to security of supply in the United Kingdom for nearly half a century. 44 RWE Annual Report 20201 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE successful in British capacity market auctions. In the first quarter of 2020, three Wood pellet manufacturer Georgia Biomass sold to Enviva Partners. At the end of July, auctions were held for the British capacity market, some of the outcomes of which will have we sold Georgia Biomass Holding to US-based Enviva Partners. The agreed price was a significant impact on the earnings of our power stations. The first round of bids, which US$175 million. Georgia Biomass operates a large-scale plant in Waycross, Georgia, which took place at the end of January, related to the delivery period from 1 October 2022 to manufactures wood pellets for industrial use. The plant’s most recent annual production 30 September 2023. RWE power plants qualified for capacity payments for a total secured output totalled 800,000 metric tons. Our disposal of Georgia Biomass is in line with our new capacity of 6.5 GW. During the aforementioned period, these stations will be remunerated strategic orientation. We no longer consider wood pellet production as one of our core for being online and thereby contributing to security of supply. However, at £6.44 / kW (plus businesses. The buyer Enviva Partners, based in Bethesda, Maryland, ranks among the inflation adjustment), the capacity payment established in the bidding procedure was much world’s leading producers of this fuel. lower than in similar auctions in earlier years. At the beginning of February, a second auction was held, which related to the delivery period unable to produce electricity from biomass in the Dutch power station Eemshaven from from 1 October 2020 to 30 September 2021. An earlier auction for this period had already mid-May to mid-November 2020 due to fire damage. The two units ran solely on hard coal taken place in December 2016, at which RWE stations with a total capacity of 8.0 GW during this period. The fire broke out in a biomass supply unit. No one was injured. The fire (including Aberthaw) qualified for a payment of £22.50 / kW. The recent auction was held to affected our earnings by a low to medium double-digit million euro amount. The interruption close remaining capacity gaps. Therefore, RWE only entered a small asset, which did not of generation from biomass resulted in a commensurate reduction in the state subsidy we submit a successful bid. receive for co-firing this fuel. Moreover, we incurred costs for the storage of biomass stocks Six-month interruption of generation from biomass in Eemshaven due to fire. We were which we had purchased forward early on. In the third auction, for the period from 1 October 2023 to 30 September 2024, which took place in early March, remuneration was secured for 6.5 GW of RWE generation capacity. Markus Krebber becomes CEO of RWE AG in May 2021 – Michael Müller and Zvezdana The stations will receive a payment of £15.97 / kW (plus inflation adjustment). Seeger on board since November 2020. Last year, the Supervisory Board of RWE AG Capacity auctions have been held in Great Britain since 2014. The government’s objective passed a resolution to give Markus Krebber (48) another term on the Executive Board is to ensure that a sufficient amount of generation capacity is available to the national (through to 30 June 2026) and appoint him CEO in the near future. He will succeed Rolf market. In November 2018, the British capacity market had to be suspended for about a Martin Schmitz (63), whose contract will expire, as CEO with effect from 1 May 2021. The year, because the approval it had been granted under subsidy law was declared null and Supervisory Board is confident that this will ensure that the Group maintains its strategic void by the Court of the European Union. After renewed clearance from Brussels in October orientation. Markus Krebber has been the CFO of RWE AG since 2016. Together with 2019, capacity payments were resumed and the postponed auctions were held. In January Rolf Martin Schmitz, he has succeeded in transforming RWE into a leading renewable reached personnel decisions that will ensure the company’s continued success. In July, it 2020, we received approximately €50 million in retroactive payments for 2018 and about energy company. €180 million for 2019. In our income statement, we had already recognised these cash inflows with an effect on fiscal 2019. 45 RWE Annual Report 20201 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information Zvezdana Seeger (56) and Michael Müller (49) will be Markus Krebber’s fellow members on auction for a contract for difference, after which we can make a final investment decision. the Executive Board of RWE AG. The Supervisory Board appointed the two executives to the Then the option fee will be replaced by a much lower lease payment. If the project corporate body with effect from 1 November 2020. Before joining RWE, Zvezdana Seeger, progresses on schedule, the new wind farms could be commissioned towards the end of the who holds a degree in economics, was a member of the Management Board of DB Privat- decade. Under The Crown Estate’s auction at the beginning of the year, development rights und Firmenkundenbank AG and COO of Deutsche Bank AG’s Private and Corporate were won for a total of six offshore sites on which wind farms with a capacity of up to Business Unit. At RWE AG, she holds the human resources and IT offices and is also the 7,980 MW can be built. Some of the participants also securing option rights submitted company’s Labour Director. Michael Müller has held managerial positions at RWE since much higher bids than us. RWE will pay the lowest annual average option fee per megawatt 2005. The most recent posts held by the engineering post-doctorate and economist were among all successful bidders. those of Managing Director and CFO of the subsidiary RWE Supply & Trading GmbH. Michael Müller is responsible for finance, taxes and business services at RWE AG. He will Considerable drop in earnings due to the worst cold wave in Texas in over a century. succeed Markus Krebber as Chief Financial Officer when Mr. Krebber takes over as Chief In February 2021, an extraordinary cold front in parts of the USA caused substantial supply Executive Officer from Mr. Schmitz. Michael Müller will continue to hold his positions at outages. Winter storms and icy rain forced some RWE wind farms to go offline for several RWE Supply & Trading concurrently until 30 April 2021. days. We had sold forward a portion of the generation of these assets and therefore had to More detailed information on the members of the Executive Board of RWE AG can be found statutory price regulations, we had to pay up to US$9,000 / MWh for these purchases. This at www.rwe.com/en/management-board-and-supervisory-board and on pages 9 et seq. of weighed on earnings in the Onshore Wind / Solar segment by a low to medium triple-digit this report. million euro amount. buy electricity in order to meet our supply obligations. Due to the tight supply situation and Events after the close of the fiscal year German government and power plant operators agree on compensation for nuclear phaseout. In March 2021, the German government and the country’s nuclear power station operators reached an agreement on the compensation due for the accelerated nuclear phaseout. The talks were initiated because the German Constitutional Court RWE wins rights to develop new offshore wind power sites in English North Sea. At an declared the original statutory compensation regulations null and void (see page 39). As auction held in February 2021, RWE secured the rights to develop 3,000 MW of offshore regards RWE, this relates to unusable generation contingents of 25.9 million MWh and wind capacity across two neighbouring locations in the English North Sea. In return, we will stranded investments of about €40 million. The government has indicated that it will pay pay an annual option fee of £82,552 / MW (plus inflation adjustment) until we make a final €33.22 / MWh as compensation for the electricity contingents. Furthermore, the agreement investment decision. The sites are situated on Dogger Bank in a shallow region of the envisages that we will be reimbursed for half of the stranded investments. We accept this North Sea. RWE is already developing Sofia, a further offshore wind project, in the vicinity. solution. However, it is yet to be written into law and a public law contract between the First, all the new sites will be subjected to a Plan-Level Habitats Regulations Assessment government and power plant operators. It also needs to be reviewed by the European (HRA). Given a positive result, we will start developing the project and paying the option fee. Commission for compliance with subsidy law. The agreement with the government did not As soon as the necessary permits have been obtained, we can participate in a subsidy affect the Group’s financial statements. 46 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.5 Business performance Despite the corona crisis, 2020 was a successful fiscal year for us. RWE achieved our earnings: it caused slight delays in wind projects and losses in our securities adjusted EBITDA of €3.2 billion, which exceeded the guided range. This was primarily thanks to a very good trading performance. In addition, favourable weather conditions enabled high utilisation of our wind farms. The pandemic only had a limited impact on portfolio. Positive development was displayed not only by our earnings, but also by our carbon footprint: RWE’s CO2 emissions recorded another significant decline. Last year, they were already 62 % below the 2012 level. Business performance in 2020: what we forecast and what we accomplished € million 3,235 2,489 2,676 2,183 Forecast overachieved Forecast met Forecast underachieved 2019 actual Forecast for 2020 1 2020 actual 1,771 1,267 1,213 1,069 614 RWE Group Core business Offshore Wind 472 295 Onshore Wind / Solar Adjusted EBITDA  1 See pages 94 et seq. of the 2019 Annual Report. The hatched portion reflects the forecast range. 672 621 731 539 559 306 Hydro / Biomass / Gas Supply & Trading Coal / Nuclear RWE Group RWE Group Adjusted EBIT Adjusted net income 47 RWE Annual Report 2020GWh Offshore Wind of which: Germany2 United Kingdom Netherlands Turkey Coal / Nuclear2 RWE Group 1 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Power generation Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total1 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 Onshore Wind / Solar 16,762 8,056 7,009 4,116 – – – – – – – – Hydro / Biomass / Gas 5,910 4,202 2,060 1,760 49,414 50,564 – – – – – – – – – – – – – – – – – – 3,584 9,466 – – – 654 3,584 8,812 – – – – – – – – – – – – – – – – 7,009 4,116 16,762 8,056 61,178 66,103 12,583 11,733 25,710 34,713 18,570 16,975 4,281 2,682 1,737 2,026 2,060 1,760 8,576 7,836 460 577 3,679 1,599 – 19 – 12 – – – – – – – – 25,250 33,482 11,307 6,564 4,281 2,682 29,700 16,386 2,060 1,760 50,140 50,788 36,649 48,249 7,375 14,200 20,682 21,233 146,775 153,165 726 224 36,649 48,249 3,791 4,734 20,682 21,233 61,826 74,890 1 Including production volumes not attributable to any of the energy sources mentioned (e. g. electricity from 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. These purchases amounted to 2,157 GWh (previous year: 1,829 GWh) in the Hydro / Biomass / Gas segment and 1,009 GWh (previous year: 1,791 GWh) in the Coal / Nuclear segment. Electricity production 4 % down on prior year. In the fiscal year that just came to a close, for conventionally generated electricity. Due to the latter circumstance, less use was made the RWE Group produced 146,775 GWh of electricity, of which 20 % was generated from of our British gas-fired power stations than in 2019. Our electricity generation from gas renewables, i. e. wind, sun and biomass. Natural gas accounted for a share of 34 %. Lignite grew elsewhere; in Germany this was partly driven by said decline in the price of gas. In and hard coal continued to lose significance, contributing 25 % and 5 % to our power addition, in the Netherlands, Claus C resumed operations after being offline for several production. The portion attributable to nuclear fuel was 14 %. years because it was not profitable. More use was also made of our gas-fired power plant in Denizli, Turkey. One of the reasons was that the large share of local electricity supply Our electricity generation dropped by 4 % compared to the previous year. The most customarily accounted for by hydropower experienced a weather-induced drop. significant declines were recorded by our hard coal and lignite power stations. One contributing factor was that gas, the energy source competing with coal, was occasionally The contribution of renewable energy to our electricity generation rose considerably. This much cheaper and therefore more attractive than in the previous year. Furthermore, the was mainly because the operations transferred from E.ON to RWE in September 2019 were corona crisis and substantial amounts of wind power put on the system reduced demand considered in our figures for a full twelve months for the first time. In addition, we benefited 48 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information from favourable wind conditions and the commissioning of new onshore wind farms. In addition to our in-house generation, we procure electricity from suppliers outside of the The fact that our Dutch hard coal-fired power stations Amer 9 and Eemshaven are now Group. In the year being reviewed, these purchases totalled 53,940 GWh (previous year: increasingly run on biomass also had a positive impact. However, biomass usage in 46,476 GWh). In-house generation and power purchases combined for 200,715 GWh Eemshaven was interrupted from May to November 2020 due to fire damage. (previous year: 199,641 GWh). Power generation from renewables Offshore Wind Onshore Wind Solar Hydro Biomass Total GWh Germany United Kingdom Netherlands Poland Spain Italy Sweden USA Rest of the world RWE Group 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2,082 1,299 1,168 1,106 4,690 2,755 2,134 1,278 – – – – 237 – – – – – – 62 – – 768 997 890 882 339 702 733 1,047 406 106 9,059 2,564 30 28 7,009 4,116 16,267 7,970 3 – 7 1 51 – – 271 99 432 1 – – 1 – – – 35 2 39 1,674 1,856 4 46 4,931 4,308 118 193 342 383 7,284 4,609 14 – 29 – – – 18 – 20 – – – 146 164 3,665 1,581 4,454 2,301 – – – – – – – – – – – – 998 970 882 576 734 1,067 406 168 9,330 2,599 275 194 1,981 2,251 4,011 2,010 29,700 16,386 Lower generation capacity due to coal power plant closures. At the end of 2020, we had hard coal-fired power plants were decommissioned at the end of 2020. They are scheduled a total installed power production capacity of 40.7 GW, giving us a leading market position to be shut down in 2021 and were therefore excluded from the capacity figures as of the in Europe. This figure includes electricity from generation assets not owned by us that we balance-sheet date. The Niederaussem D lignite block (297 MW) was also shut down at the can deploy at our discretion on the basis of long-term agreements. Conversely, we no longer end of the year. Conversely, we added a gas-fired power plant to our fleet through the consider our five German lignite blocks, which are in legally mandated security standby and acquisition of King’s Lynn (382 MW) in the east of England. We increased production will be shut down for good, a process that will start in 2021 and end in 2023. We have capacity from renewables by 1 GW primarily by completing four large-scale onshore wind adjusted the prior-year figures accordingly. farms in the USA (see page 43). The conversion of the Dutch Amer 9 and Eemshaven hard coal-fired power stations for increased biomass co-firing also contributed to the rise in Our generation capacity dropped by 0.7 GW last year, above all due to the German coal renewable energy capacity. This led to a commensurate decline in the share of generation phaseout. As set out on page 44, the Ibbenbüren B (794 MW) and Westfalen E (764 MW) from these assets attributable to hard coal. 49 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information In terms of generation capacity, gas is our main energy source, accounting for a share of The geographic focus of our generation business is Germany, where 51 % of our installed 35 % at the close of 2020. Renewables are in second place, with a share of 25 %. At the end capacity is located. The United Kingdom and the Netherlands follow, accounting for shares of of 2020, our wind turbines had a total installed capacity of 8.5 GW, of which 6.6 GW were 23 % and 14 %, respectively. As a result of the acquisition of E.ON’s renewable energy business onshore and 1.9 GW were offshore. This makes wind our most important source of in September 2019, the USA has become our fourth most important generation market. renewable energy, followed by biomass (0.8 GW), hydropower (0.6 GW) and solar (0.2 GW). More than half of our onshore wind turbines are situated there, most of which are in Texas. Installed capacity1 As of 31 December 2020, MW Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total2 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas of which: Germany3 United Kingdom Netherlands / Belgium Turkey Coal / Nuclear3 RWE Group4 1,918 6,858 1,366 432 137 748 – 7 – 20 – – 2,336 13,901 2,336 – – – – 3,807 6,984 2,323 787 400 10,148 2,358 14,301 – – – – – – 8,548 8,548 – – 1,474 – – 1,474 – 783 2,257 – – – – – – 2,770 2,770 2020 1,918 6,877 2019 1,918 6,063 19,369 19,080 6,614 7,374 4,545 787 12,535 40,702 6,583 7,118 4,519 787 14,352 41,415 1 Assets scheduled for decommissioning are excluded from the capacity overview once they stop producing electricity. They include our five lignite units in legally mandated security standby (1,448 MW) which have therefore been excluded from the figures for 2020 and 2019. The Ibbenbüren B and Westfalen E hard coal-fired power stations stopped being included at the end of 2020. The commercial rounding of certain figures can result in inaccurate sum totals. 2 Including capacity not attributable to any of the energy sources mentioned (e. g. oil-fired power stations). 3 Including capacity of generation assets not owned by RWE that we can deploy at our discretion on the basis of long-term use agreements. At the end of 2020, these assets accounted for a net installed capacity of 2,211 MW in the Hydro / Biomass / Gas segment and 783 MW in the Coal / Nuclear segment. 4 Including insignificant capacity at RWE Supply & Trading. 50 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Installed capacity based on renewables1 Offshore wind Onshore wind Solar Hydro Biomass Total As of 31 December 2020, MW Germany United Kingdom Netherlands Poland Spain Italy Sweden USA Rest of the world RWE Group 598 1,272 – – – – 48 – – 1,918 666 707 268 385 447 475 116 3,543 10 6,616 3 – – 1 45 – – 125 47 220 432 82 11 – 12 – – – 65 602 1 The commercial rounding of certain figures can result in inaccurate sum totals. Significant decline in CO2 emissions. Last year, our power stations emitted 68.9 million metric tons of carbon dioxide. This was 19.2 million metric tons, or 22 %, less than in 2019. The main reason for the drop was the substantial reduction in electricity generation from lignite and hard coal last year. We posted a decrease not only in our absolute but also our specific emissions, i. e. carbon dioxide per megawatt hour of electricity generated, which fell from 0.58 to 0.47 metric tons. CO2 emissions Million metric tons Hydro / Biomass / Gas of which: Germany1 United Kingdom We need emission allowances for nearly all our carbon dioxide emissions. We normally Netherlands purchase the certificates on the forward market. Western European countries allocate free emission allowances to energy companies only in exceptional cases. In the year being reviewed, we were only able to cover 1.1 million metric tons of carbon dioxide with such state allocations. Turkey Coal / Nuclear RWE Group – 55 737 – – – – – – 2020 1,698 2,117 1,016 386 504 475 164 3,668 122 792 10,148 2019 1,706 2,115 855 386 459 475 164 2,949 71 9,180 2020 2019 +/– 21.2 26.3 – 5.1 3.5 9.1 7.0 1.6 47.7 68.9 3.3 12.9 9.1 1.0 61.8 88.1 0.2 – 3.8 – 2.1 0.6 – 14.1 – 19.2 1 Including CO2 emissions of power stations not owned by RWE that we can deploy at our discretion on the basis of long-term use agreements. In 2020, these stations emitted a total of 1.1 million metric tons of CO2 (previous year: 1.3 million metric tons). 51 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information 51.4 million metric tons of lignite produced. Our generation companies procure the fuel they need either directly on the market or via RWE Supply & Trading, except for lignite, which External revenue € million we source from proprietary opencast mines. In our Rhenish mining area west of Cologne, we Offshore Wind produced 51.4 million metric tons of lignite last year. This was 13.4 million metric tons less than in the preceding year, owing to the lower utilisation of our power plants. We used the lion’s share, or 41.8 million metric tons, of lignite to generate electricity. The remainder was employed in the manufacture of refined products (e. g. lignite powder, hearth furnace coke and briquettes) and, to a limited extent, to generate process steam and district heat. External sales volume: marginal gain for electricity; accounting effect reduces gas Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other Core business Coal / Nuclear sales. Last year, we sold 194,465 GWh of electricity and 36,463 GWh of gas, compared to 191,973 GWh and 56,640 GWh in 2019. These transactions were largely effected by the RWE Group (excluding natural gas tax / electricity tax) Supply & Trading segment. We sold slightly more of our main product, electricity. Supply volumes at RWE Renewables rose considerably, but RWE Supply & Trading sold much less electricity from RWE power stations externally. Our gas deliveries decreased by 36 %. The main reason was that we started recording gas sales by RWE Supply & Trading in the Czech Natural gas tax / electricity tax RWE Group 2020 2019 +/– 332 1,855 1,056 9,597 9 85 1,265 1,200 9,554 6 12,849 12,110 839 1,015 13,688 13,125 208 152 13,896 13,277 247 590 – 144 43 3 739 – 176 563 56 619 Republic as pure trading transactions on 1 July 2019, eliminating them from sales volume External revenue slightly up on 2019. Our revenue from customers outside of the Group and revenue. totalled €13,688 million (excluding natural gas tax and electricity tax), 4 % more than in the prior year. Our electricity revenue recorded an increase of 14 % to €11,701 million, clearly exceeding sales growth. Two effects came to bear here: we realised higher market prices for the electricity generation of our conventional power stations than in 2019 and we benefited from the shift in our production to electricity from renewables, for which we usually receive payments exceeding the market level. Conversely, our gas revenue dropped by 54 % to €534 million. The aforementioned change in the recognition of revenue in the Czech Republic was the main reason. In addition, lower gas prices came to bear. 52 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information External revenue by product1 € million Electricity revenue of which: Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other Core business Coal / Nuclear Gas revenue of which: Hydro / Biomass / Gas Supply & Trading Core business Other revenue 2020 2019 + /– Adjusted EBITDA € million 11,701 10,250 1,451 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading 247 733 13 Other, consolidation 516 Core business – Coal / Nuclear 1,509 RWE Group 332 1,676 684 8,775 1 11,468 233 534 5 529 534 1,453 85 943 671 8,259 1 9,959 291 1,156 22 1,134 1,156 1,719 – 58 – 622 – 17 – 605 – 622 – 266 RWE Group (excluding natural gas tax /  electricity tax) 1 Some prior-year figures adjusted. 13,688 13,125 563 2020 2019 1,069 472 621 539 – 25 2,676 559 3,235 614 295 672 731 – 129 2,183 306 2,489 +/– 455 177 – 51 – 192 104 493 253 746 Adjusted EBITDA 30 % up year on year. Our adjusted earnings before interest, taxes, depreciation and amortisation (adjusted EBITDA) amounted to €3,235 million. We thus overachieved the March 2020 outlook we published on pages 94 et seq. of the 2019 Annual Report, which envisaged a range of €2,700 million to €3,000 million. Adjusted EBITDA from our core business, which we had projected to be between €2,150 million and €2,450 million, also clearly exceeded expectations, totalling €2,676 million. This was primarily due to energy trading, which recorded another very strong result following the exceptional performance in 2019. Adjusted EBITDA achieved by the RWE Group posted 30 % year-on-year growth. This was mainly because the operations transferred from E.ON to RWE in September 2019 were considered in the consolidated financial statements for a full twelve months for the first time. The increased utilisation of our wind farms also made Sustainable investors are increasingly interested in the portion of total RWE Group revenue a contribution to the rise in earnings. accounted for by coal-fired generation and other coal products. In the fiscal year that just ended, this share was 23 %. The following developments were observed in the segments: • Offshore Wind: Here, adjusted EBITDA totalled €1,069 million. Our guidance envisaged a figure between €900 million and €1,100 million. Compared to 2019, we posted an increase of 74 %. This was a result of the inclusion of E.ON’s renewable energy business in our figures for a full year for the first time. Improved wind conditions also had a positive effect. They played a role in our closing the fiscal year at the upper end of the forecast range. 53 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Onshore Wind / Solar: Adjusted EBITDA recorded by this segment amounted to • Coal / Nuclear: Adjusted EBITDA recorded here amounted to €559 million, which was €472 million, falling short of the expected range of €500 million to €600 million. Corona- within the anticipated range of €500 million to €600 million. This represents 83 % growth induced delays in commissioning new wind farms came to bear here. Therefore, these compared to the preceding year. The main reason for this was that we realised higher assets were unable to make the expected contribution to earnings in 2020. The negative wholesale prices for electricity generated by our lignite-fired and nuclear power plants effect of the corona crisis on electricity market prices also led to unplanned earnings than in 2019. We had already sold forward nearly all of the production of these stations in shortfalls. This affected wind farms, the generation of which we cannot sell at firm earlier years. Another positive effect came from our acquisition in September 2019 of conditions and which are therefore exposed to market risks. Relative to the previous year, E.ON’s minority interests in the Gundremmingen and Emsland nuclear power plants. adjusted EBITDA improved by 60 %, predominantly due to the first full-year inclusion of the renewable energy business we received from E.ON. In addition, we benefited from the commissioning of new generation capacity. Adjusted EBIT € million • Hydro / Biomass / Gas: In this segment, adjusted EBITDA came in at €621 million. We had Offshore Wind forecast a figure between €550 million and €650 million. Earnings were down 8 % compared to 2019. One reason for this was lower income from participating in the British capacity market, which was suspended for about a year pursuant to a high court decision in November 2018. Following the resumption of capacity payments, earnings for 2019 included back payments for 2018. In the Netherlands, the economic situation of the Eemshaven power station deteriorated, whereas the Claus C gas-fired power plant made Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business a stronger contribution to earnings after having been mothballed for several years. Our Coal / Nuclear income from the commercial optimisation of power plant dispatch was lower than in RWE Group 2019, but higher than planned. This was the main reason why the segment’s adjusted EBITDA was at the upper end of the forecast range. 2020 2019 697 86 283 496 – 25 1,537 234 1,771 377 59 342 691 – 128 1,341 – 74 1,267 + /– 320 27 – 59 – 195 103 196 308 504 • Supply & Trading: Our performance in the trading business was much better than €1,771 million, clearly exceeding the forecast range of €1,200 million to €1,500 million. expected. Accordingly, at €539 million, adjusted segment EBITDA was clearly above This growth was driven by the same factors benefiting adjusted EBITDA. The difference the forecast range of €150 million to €350 million. Despite this, we were unable to between these two key figures is that operating depreciation and amortisation, which match the earnings achieved in the previous year (€731 million) which benefited from amounted to €1,464 million in 2020 compared to €1,222 million in the previous year, an exceptionally strong trading performance. Our gas business also displayed very is considered in adjusted EBIT, but not in adjusted EBITDA. Adjusted EBIT 40 % up on prior year. The RWE Group’s adjusted EBIT rose by 40 % to satisfactory development which, however, was not quite as good as in 2019. 54 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Reconciliation to net income € million Adjusted EBITDA 2020 2019 +/– Non-operating result € million 3,235 2,489 746 Disposal result Operating depreciation, amortisation and impairment losses – 1,464 – 1,222 – 242 Effect on income from the valuation of derivatives and inventories Other Non-operating result 2020 2019 +/– 13 1,886 – 2,020 – 121 48 81 – 1,210 – 1,081 – 35 1,805 – 810 960 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 1,771 – 121 – 454 1,196 – 363 833 221 1,054 59 – 1,267 – 1,081 – 938 – 752 92 – 660 9,816 9,156 643 15 504 960 484 1,948 – 455 1,493 – 9,595 – 8,102 – 584 – 15 The non-operating result, in which we recognise certain factors which are not related to operations or the period being reviewed, improved by €960 million to – €121 million in the past fiscal year. Its components were as follows: • At €13 million, income from the disposal of investments and assets was immaterial (previous year: €48 million). It largely resulted from the sale of US wood pellet producer Georgia Biomass (see page 45). • At €1,886 million, the effects of the valuation of derivatives and inventories on earnings were unusually high, after totalling €81 million in the preceding year. However, such 995 8,498 – 7,503 effects are only temporary and are due in part to the fact that, pursuant to IFRS, financial instruments used to hedge price risks are accounted for at fair value at the corresponding balance-sheet date, whereas the hedged underlying transactions are only recognised as Reconciliation to net income: exceptional effects overshadow operating development. a profit or loss when they are realised. The reconciliation from adjusted EBIT to net income was greatly affected by one-off effects. Substantial income from the valuation of derivatives was counterbalanced by impairments • In the ‘other’ line item, we reported a loss of €2,020 million (previous year: €1,210 million). of a similar order recognised for coal-fired power plants and opencast mines. Unlike in the This was mainly caused by €1.8 billion in impairments recognised for power plants and preceding year, the positive exceptional effect of the asset swap with E.ON did not play a opencast mines in reaction to the German coal phaseout and deteriorated market role in the reporting year: in 2019 the sale of innogy’s grid and retail businesses and the prospects. We completely wrote off our German Ibbenbüren B and Westfalen E hard coal- stake in Czech gas network operator innogy Grid Holding (IGH) led to a deconsolidation gain fired power stations, which won decommissioning remuneration contracts in an auction of €8.3 billion. There was no similar effect in 2020. Accordingly, net income was significantly held by the German Network Agency. The compensation claim of €216 million obtained below the high level achieved in the prior year. in the bidding process was also recognised with an effect on income. The impairments also related to our lignite business and our Dutch power stations. 55 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Financial result € million Interest income of which: E.ON dividend Interest expenses Net interest Interest accretion to non-current provisions of which: interest accretion to mining provisions Other financial result Financial result 2020 2019 +/– • The other financial result dropped by €202 million to – €186 million. We suffered losses 283 182 – 296 – 13 – 255 – 186 – 186 – 454 185 – – 258 – 73 – 881 – 581 16 – 938 on our portfolio of securities due to the turmoil on the capital markets caused by the coronavirus pandemic, having achieved gains in the previous year. In addition, unfavourable development of interest and currency exchange rates had a negative effect on income from financial transactions. Before taxes, our continuing operations posted income of €1,196 million (previous year: – €752 million). Taxes on income amounted to €363 million, corresponding to an effective tax rate of 30 %. In light of RWE’s tax gains, this is a fairly high number. The amortisation of 98 182 – 38 60 626 395 – 202 deferred tax assets was the main reason for this. A counteracting effect on the tax rate 484 stemmed from a reduction of our tax risk provision. After taxes, our continuing operations achieved income of €833 million (previous year: – €660 million). Our financial result totalled – €454 million, exceeding the year-earlier figure by €484 million. Income from discontinued operations amounted to €221 million. It stemmed from the Its components changed as follows: stake in Slovak energy utility VSE, which we acquired from innogy in 2019 and transferred to E.ON in August 2020 (see page 42). This figure includes the deconsolidation gain of • Net interest improved by €60 million to – €13 million because, for the first time, we €154 million. In the previous year, this item included the earnings from all of the discontinued received a dividend from the stake in E.ON we acquired in 2019, which currently amounts innogy operations. We sold them in September 2019, except for VSE. The deconsolidation to 15 %. However, we also registered higher interest charges. This was in part due to the gain (€8,258 million) caused income from discontinued operations to be exceptionally high first full-year consideration of E.ON’s renewable energy business, which caused us to (€9,816 million). recognise higher expenses for financing onshore wind farms in the USA. Moreover, there was a rise in costs incurred to hedge currencies for business activities outside of the Non-controlling interests in income declined by €584 million to €59 million. This was due to Eurozone. the sale of our stake in innogy (76.8 %) in September 2019. Since then, there has been no more income attributable to minority shareholders of the innogy Group. • The interest accretion to non-current provisions reduced income by €255 million. In the previous year, the decline was much more substantial (€881 million). In 2019, The portion of earnings attributable to RWE hybrid capital investors was zero (previous year: we significantly lowered the real discount rate applied when calculating our mining €15 million). Our only hybrid bond classified as equity pursuant to IFRS was redeemed in provisions. This led to an increase in the present value of the obligations, which was March 2019. RWE’s remaining hybrid capital is classified as debt, and the interest on it is in part recognised as an expense in the interest accretion. recognised in the financial result. 56 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information The RWE Group’s net income amounted to €995 million (previous year: €8,498 million). This resulted in earnings per share of €1.56 (previous year: €13.82). An average of 637.3 million RWE shares were outstanding in the reporting year. This figure was higher than in 2019 Capital expenditure on property, plant and equipment and on intangible assets1 € million (614.7 million) due to the capital increase of August 2020. Reconciliation to adjusted net income € million Original figures Adjustment Adjusted figures 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: 1,771 – 121 – 454 1,196 – 363 833 221 1,054 – 121 139 260 145 405 – 221 184 1,771 – – 315 1,456 – 218 1,238 – 1,238 Non-controlling interests 59 – 34 25 Net income / income attributable to RWE AG shareholders 995 218 1,213 Adjusted net income higher than expected. Adjusted net income amounted to €1,213 million. Due to the unexpectedly positive operating earnings, it exceeded the guided range of €850 million to €1,150 million. We calculate adjusted net income by deducting Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal /  Nuclear RWE Group2 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business from net income according to IFRS the non-operating result, income from discontinued Coal / Nuclear operations as well as major special items in the financial result and in income attributable to RWE Group other shareholders. Instead of the actual tax rate, we use a rate of 15 %, in line with the average tax burden expected in coming years. We did not state adjusted net income for 2019 because this figure would have been of limited informational value due to the significant one-off effects of the asset swap with E.ON. 1 Table only shows cash investments. Prior-year figures restated accordingly. 57 2020 2019 +/– 756 1,154 153 43 – 2,106 183 2,285 492 752 212 29 – 3 1,482 281 1,767 264 402 – 59 14 3 624 – 98 518 520 408 115 18 11 1,072 1 1,073 – 46 2 68 – 112 4 – 4 + /– 520 362 113 – 50 123 1,068 1 1,069 1 Table only shows cash investments. Prior-year figures restated accordingly. 2 Including a – €4 million (2020) and €4 million (2019) consolidation effect between the core business and the Coal / Nuclear segment. Capital expenditure on financial assets1 € million 2020 2019 RWE Annual Report 20201 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Capital expenditure substantially up on 2019. In fiscal 2020, capital expenditure Headcount marginally down year on year. As of 31 December 2020, the RWE Group had amounted to €3,358 million, surpassing the year-earlier level (€1,771 million) by 90 %. 19,498 people on its payroll, of which 14,701 were employed in Germany and 4,797 Unlike in the past, we now only focus on capital expenditure with an effect on cash in our worked abroad. Part-time positions were considered in these numbers on a pro-rata basis. financial reporting. About 85 % of the funds were used in the Offshore Wind and Onshore Personnel figures were down slightly compared to the end of 2019 (– 294). We recorded the Wind / Solar segments. biggest decline in the Coal / Nuclear segment, where headcount decreased by 379, to a certain extent due to partial retirement programmes. By contrast, the workforce in our core Compared to 2019, our spending on property, plant and equipment and intangible assets business grew by 85. Major contributing factors were the construction of the UK North Sea rose by 29 % to €2,285 million. This was mainly due to the first full-year inclusion of capital wind farm Triton Knoll and the acquisition of Nordex’s European development business. In expenditure in the renewable energy business received from E.ON. Last year, a substantial addition, we need more employees to continue developing the Group’s IT infrastructure. This portion of the funds was used to build the Triton Knoll and Kaskasi wind farms in the North led to new hires, above all in the Supply & Trading segment. A counteracting effect came Sea as well as several major US onshore wind farms. Our capital spending on financial from sales of operations by our subsidiary Belectric, which specialises in developing solar assets, which was immaterial in 2019, totalled €1,073 million in the year under review. farms and energy storage systems. Staff figures do not include apprentices or trainees. At Major expenditure items were the 20 % stake we will take in the Rampion offshore wind farm the end of 2020, 750 young adults were learning a profession at RWE, compared to 701 in in the UK, the acquisition of Nordex’s European development business, and the purchase of the previous year. the 382 MW King’s Lynn gas-fired power station in the east of England. We have provided detailed information on these transactions on pages 42 et seqq. Workforce 1 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other2 Core business Coal / Nuclear RWE Group 31 Dec 2020 31 Dec 2019 1,119 2,402 2,667 1,790 425 8,403 11,095 19,498 1,016 2,462 2,893 1,633 314 8,318 11.474 19,792 +/– 103 – 60 – 226 157 111 85 – 379 – 294 1 Converted to full-time positions. 2 This item exclusively comprises employees of the holding company RWE AG. 58 RWE Annual Report 20201 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.6 Financial position and net worth Our financial position and net worth continued to improve in the fiscal year that just • We have a Commercial Paper Programme for short-term refinancing, which was updated ended. The main drivers were a significant increase in cash flows from operating last year. It enables us to raise funds equivalent to up to €5 billion on the money market activities and the capital increase conducted in August 2020. Our net debt dropped to (before update: US$5 billion). We only made moderate use of these funds in the past fiscal €4.4 billion despite the substantial amount of capital spent on renewable energy. By the year. At times, a total of up to €1.2 billion in commercial paper was outstanding. end of the year, it was just 1.7 times higher than adjusted EBITDA of the core business. As a result, we remained well below the self-imposed upper limit of 3.0. The equity ratio • Furthermore, we have access to a €5 billion syndicated credit line, which serves to secure also displayed positive development, rising by 1.8 percentage points to 29.1 %. liquidity. It was granted to us by a consortium of 27 international banks and consists of two tranches: one of €3 billion, which expires in April 2025, and one of €2 billion, which we have been granted through to April 2021. Each tranche can be extended for a year. We Responsibility for procuring funds. Responsibility for Group financing is pooled at require the banks’ approval for this with regard to the first tranche, but not for the second RWE AG. As the parent company, RWE AG is responsible for acquiring funds from banks or one. So far, RWE has not used the syndicated credit line. the financial markets. Subsidiaries only raise debt capital directly in specific cases, for example if it is advantageous economically to make use of local credit and capital markets. Bond volume drops to €0.6 billion. RWE bonds with a total face value of €0.6 billion RWE AG also acts as a co-ordinator when subsidiaries assume contingent liabilities. This were outstanding at the end of 2020. Essentially, these were two hybrid bonds: one of allows us to manage and monitor financial risks centrally. Moreover, it strengthens our €282 million with a 3.5 % coupon and one of US$317 million with a 6.625 % coupon. Due to position when negotiating with banks, business partners, suppliers and customers. early buybacks in October 2017, the outstanding amounts are below the issuance volumes of €550 million and US$500 million. The bonds’ earliest redemption dates are in April 2025 Tools for raising debt capital. We cover a major portion of our financing needs with and March 2026. A third hybrid bond with a volume of €539 million and a coupon of 2.75 % earnings from our operating activities. In addition, we have a wide range of tools to procure was redeemed at the first call date, in October 2020, without being replaced with new debt capital. hybrid capital. It had an original face value of €700 million and was reduced by €161 million through bond buybacks in 2017. • Our Debt Issuance Programme (DIP) gives us latitude in raising debt capital for the long term. Our current DIP allows us to issue bonds with a total face value of €10 billion. However, RWE AG has not made any such issuances since 2015. 59 RWE Annual Report 20201 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information Borrowing costs rise to 2.3 %. In 2020, the cost of debt for RWE was 2.3 %. It was calculated for our average liabilities from bonds, commercial paper and bank loans held Cash flow statement1 € million during the year. The cost of debt was slightly higher than in the preceding year (1.4 %). This Funds from operations was because we refinanced our business to a lesser extent via commercial paper. The Change in working capital 2020 2019 +/– 4,138 1,809 2,329 – 13 – 2,786 2,773 interest rates of these bonds are relatively low due to their short maturities. In the reporting year, we had less need for debt financing than in 2019, in part due to the capital increase conducted in August, which resulted in proceeds of €2.0 billion (see page 42). Cash flows from operating activities of continuing operations 4,125 – 977 5,102 Cash flows from investing activities of continuing operations – 4,278 474 – 4,752 Cash flows from financing activities of continuing operations 1,769 189 1,580 Solid investment grade rating. The level of our borrowing costs partially depends on rating agencies’ assessment of our creditworthiness. Moody’s and Fitch make such evaluations on Effects of changes in foreign exchange rates and other changes in value on cash and cash equivalents – 34 13 – 47 request from us. They both give us a credit rating of investment grade. The agency gives our Total net changes in cash and cash equivalents 1,582 – 301 1,883 long-term creditworthiness a rating of ‘Baa3’, which was confirmed in March 2020 after an extensive review. In addition, Moody’s offered the prospect of an upgrade by raising the outlook on our rating from ‘stable’ to ‘positive’. It explained this step by citing RWE’s improved risk profile resulting from our transformation to a leading renewable energy company. Fitch rates us one grade better than Moody’s: ‘BBB’, with a stable outlook. Cash flows from operating activities of continuing operations 4,125 – 977 5,102 Minus capital expenditure – 3,358 – 1,771 – 1,587 Plus proceeds from divestitures / asset disposals 365 695 – 330 Free cash flow 1,132 – 2,053 3,185 Credit rating of RWE AG (as of 31 Dec 2020) Moody’s Fitch 1 All items relate solely to continuing operations. Non-current financial liabilities Senior debt Subordinated debt (hybrid bonds) Current financial liabilities Outlook Baa3 Ba2 P–3 BBB BB+ F2 Significantly improved operating cash flows of €4.1 billion. We generated cash flows of €4,125 million from the operating activities of our continuing operations, compared to – €977 million in the previous year. The substantial improvement was in part due to the positive development of the operating result. Added to this were effects that were reflected Positive Stable in the change in working capital. For example, commodity forward transactions led to substantial cash outflows in the prior year. Conversely, we achieved considerable income from such transactions in 2020. 60 RWE Annual Report 20201 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information Investing activities of continuing operations led to a cash outflow of €4,278 million. This was predominantly due to €3,358 million in capital expenditure on property, plant and Net debt1 € million equipment, which was contrasted by €365 million in proceeds from divestments. Cash and cash equivalents Furthermore, we made substantial purchases of securities, primarily to invest the proceeds from the capital increase temporarily. Conversely, in the previous year, we registered significant income from the sale of securities. This was one of the reasons why we received €474 million in net cash inflows from investing activities in 2019. Marketable securities Other financial assets Financial assets At €1,769 million, our cash flows from financing activities of continuing operations were much higher than the year-earlier figure (€189 million). This reflected the capital increase Bonds, other notes payable, bank debt, commercial paper Hedging of bond currency risk conducted in August, from which we received proceeds of €1,990 million. Furthermore, in Other financial liabilities the reporting year we issued slightly more financial debt than we repaid, leading to a net Financial liabilities cash inflow of €61 million. Our dividend payments to RWE shareholders (€492 million) and Minus 50 % of the hybrid capital recognised as debt minority shareholders (€30 million) had an opposite effect. On balance, the aforementioned cash flows from operating, investing and financing activities increased our cash and cash equivalents by €1,582 million. Cash flows from operating activities, minus capital expenditure on property, plant and 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 equipment and intangible assets, plus proceeds from divestments and asset disposals Provisions for dismantling wind farms results in free cash flow. In the year under review, free cash flow amounted to €1,132 million, Net debt of continuing operations clearly exceeding the negative figure recorded in the prior year (– €2,053 million). The main reason for this was the significant increase in cash inflows from operating activities. Net debt of discontinued operations Net debt 31 Dec 2020 31 Dec 2019 +/– 4,774 4,517 2,507 11,798 3,192 3,523 2,383 9,098 2,160 2,466 31 3,038 5,229 – 278 6,847 3,864 – 172 6,451 1,136 4,432 – 4,432 7 3,147 5,620 – 562 4,040 3,446 – 153 6,723 951 6,927 232 7,159 1,582 994 124 2,700 – 306 24 – 109 – 391 284 2,807 418 – 19 – 272 185 – 2,495 – 232 – 2,727 1 New definition of net debt (see commentary on the next page); prior-year figures changed due to retroactive adjustments to the first-time consolidation of the renewable energy business acquired from E.ON in 2019. 61 RWE Annual Report 20201 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information Net debt drops to €4.4 billion. As of 31 December 2020, our net debt totalled Drop in off-balance-sheet fuel purchase obligations. Net debt does not include our €4,432 million. It was completely attributable to our continuing operations as we sold the off-balance-sheet obligations, which largely stem from long-term fuel and electricity stake in VSE stated as a discontinued operation in August 2020 (see page 42). We purchase agreements. As of the balance-sheet date, payment obligations from material redefined net debt in 2020. It no longer contains our mining provisions, which essentially fuel procurement contracts amounted to €23.6 billion as opposed to €27.1 billion at the cover our obligations to recultivate opencast mining areas. The assets we use to cover these end of the previous year. For power purchase agreements, they totalled €7.1 billion, on a par provisions are also disregarded, for instance our €2.6 billion claim for damages from the with 2019. These figures are based on assumptions regarding the prospective development German lignite phaseout against the state. We have also presented net debt for 2019 of commodity prices. For further commentary on our off-balance-sheet obligations, please based on the new definition for the sake of comparability. see pages 181 et seq. in the Notes. Our net debt declined by €2,727 million compared to 31 December 2019. The main drivers Group balance sheet: equity ratio rises to 29.1 %. The balance-sheet total reported in the were the capital increase in August, the positive free cash flow, and the deconsolidation of 2020 consolidated financial statements amounted to €61.7 billion as opposed to VSE’s net debt. Profit distributions had a counteracting effect. Moreover, we registered a €64.0 billion in the previous year. Significant declines were recorded by other receivables slight increase in provisions for pensions because the discount rates we apply when and other assets (– €2.8 billion) and other liabilities (– €2.5 billion): both line items were determining the net present value of the pension obligations recorded a market-induced affected by a decrease in derivatives on our books. A drop was also registered by property, decline. Increases in the value of plan assets, which we hold to meet the obligations, were plant and equipment (– €1.1 billion), with impairments recognised for power plants and unable to offset this. The redemption of a €539 million hybrid bond also had a debt- opencast mines playing a central role, as reported on page 55. By contrast, we posted increasing effect. The reason for this is that in determining net debt, we classify half of the an increase in cash and cash equivalents (+ €1.6 billion) and marketable securities hybrid capital as equity. (+ €1.0 billion). The capital increase in August 2020 was a major factor. It was also the main reason why equity rose by €0.5 billion to €18.0 billion. The share of the balance-sheet total Leverage factor clearly below upper limit of 3.0. One of our key management parameters accounted for by equity (the equity ratio) was 29.1 %. This is 1.8 percentage points more is the ratio of net debt to adjusted EBITDA of the core business, also referred to as the than in 2019. leverage factor. This key figure is more indicative than total liabilities because it also reflects earning power and therefore our ability to meet our debt obligations. We set the upper limit The Group’s 2020 balance sheet recognises the Stella, Cranell, Raymond East and for the leverage factor at 3.0 in order to secure our financial flexibility. At 1.7, we remained Raymond West US wind farms as ‘assets held for sale’ and ‘liabilities held for sale’ because clearly below this threshold in the year being reviewed. Even excluding the funds from the we will deconsolidate these assets due to the divestments presented on page 43. In the capital increase, we would have stayed within the upper limit: the leverage factor would have prior year’s financial statements, the stake in the Slovak power utility VSE, which we sold in been 2.4. August 2020, was stated in these items. 62 RWE Annual Report 20201 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information Group balance sheet structure1 31 Dec 2020 31 Dec 2019 Group balance sheet structure1 31 Dec 2020 31 Dec 2019 € million % € million % € million % € million % Assets Equity and liabilities Equity Non-current assets 34,461 55.9 35,768 55.9 Non-current liabilities of which: Intangible assets Property, plant and equipment Current assets of which: 4,913 17,902 27,207 8.0 29.0 44.1 4,777 19,016 28,241 7.5 29.7 44.1 of which: Provisions Financial liabilities Current liabilities of which: Trade accounts receivable 3,007 4.9 3,621 5.7 Provisions Receivables and other assets Marketable securities Assets held for sale 12,530 20.3 15,311 23.9 Trade accounts payable 4,219 1,045 6.8 1.7 3,258 1,274 5.1 2.0 Other liabilities Liabilities held for sale Financial liabilities 17,971 27,280 19,470 3,951 16,417 3,004 1,247 2,387 9,240 539 29.1 44.2 31.6 6.4 26.7 4.9 2.0 3.9 15.0 0.9 17,467 26,937 18,937 3,924 19,605 2,638 1,689 2,987 11,781 510 27.3 42.1 29.6 6.1 30.6 4.1 2.6 4.7 18.4 0.8 Total 61,668 100.0 64,009 100.0 Total 61,668 100.0 64,009 100.0 1 Prior-year figures changed due to retroactive adjustments to the first-time consolidation of the renewable energy business acquired from E.ON in 2019. 63 RWE Annual Report 20201 To our investors 2 Combined review of  operations Notes to the financial statements of RWE AG (holding company) 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.7 Notes to the financial statements of RWE AG (holding company) The financial statements of RWE AG primarily reflect the business performance of its subsidiaries. In sum, the profit transfers of these companies recorded a slight increase in 2020. The good earnings produced by the renewable energy business played a role, whereas RWE Supply & Trading contributed less to the bottom line than in 2019 despite a strong trading performance. At €580 million, RWE AG’s net profit was higher than in the previous year. We intend to raise the dividend and therefore propose a payment of €0.85 per share to the Annual General Meeting taking place in April 2021. 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 Financial statements. RWE AG prepares its financial statements in compliance with the rules set out in the German Commercial Code and the German Stock Corporation Act. The financial statements are submitted to Bundesanzeiger Verlag GmbH, located in Cologne, Germany, which publishes them in the Federal Gazette. They are available on the internet at www.rwe.com/en/financial-reports. Total assets Equity and liabilities Equity Provisions 31 Dec 2020 31 Dec 2019 20,524 2,094 519 6,664 20,628 10,233 6,056 2,929 29,801 39,846 7,826 1,996 5,738 2,237 18,905 29,213 1,074 2,658 29,801 39,846 Accounts payable to affiliated companies 2020 2019 Total equity and liabilities Other liabilities Assets. RWE AG had €29.8 billion in total assets as of 31 December 2020, compared to €39.8 billion in the previous year. We registered a significant decline in accounts receivable from and payable to affiliated companies. This was the result of the merger of two subsidiaries. A substantial account receivable from one of them and a significant account payable to the other resulted from the asset swap with E.ON (see page 68 of the 2019 Annual Report). The merger caused the two items to net each other out. Other receivables also declined considerably. This is because E.ON transferred parts of the innogy business back to RWE in legal terms in mid-2020, eliminating the associated claims we had against E.ON. The increase in the marketable securities and cash and cash equivalents on our books 1,114 – 72 – 712 250 580 – 5 575 1,758 31 – 1,550 275 514 – 22 492 64 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 RWE Annual Report 20201 To our investors 2 Combined review of  operations Notes to the financial statements of RWE AG (holding company) 3 Responsibility statement 4 Consolidated financial statements 5 Further information had a counteracting effect on the total assets. The capital increase we conducted in August, • The ‘other income and expenses’ line item improved by €838 million to – €712 million. which led to proceeds of €2.0 billion, came to bear here. In addition, RWE AG subsidiaries This is because a substantial impairment was recognised for financial accounts generated higher operating cash flows, which they transferred to the Group parent. receivable from a Dutch subsidiary in 2019 as the framework conditions for electricity Therefore, RWE AG’s equity rose to €7.8 billion (previous year: €5.7 billion). The equity ratio generation from hard coal had become less favourable. The remainder was written off increased from 14.4 % to 26.3 %. in 2020, but the burden on earnings was much smaller than in the preceding year. Conversely, there was a slight increase in expenses for IT projects at RWE AG. Financial position. RWE AG is set up solidly in economic terms and has a number of financing tools at its disposal that it can use flexibly. This is reflected in our credit ratings, • In the year under review, we recorded tax income of €250 million (previous year: which are investment grade. A detailed presentation of RWE’s financial position and €275 million), largely because we reduced our tax risk provision. financing activity in the year under review can be found on pages 59 et seqq. • The presented earnings figures led to net profit of €580 million. This represents an Earnings position. RWE AG’s earnings position improved slightly compared to 2019. increase of €66 million compared to 2019. The main items on the income statement developed as follows: • The distributable profit of €575 million corresponds to the planned payment of a dividend • Income from financial assets dropped by €644 million to €1,114 million. This was due to of €0.85 per share to our shareholders. lower income from investments and write-downs of financial assets. By contrast, profit transfers from subsidiaries were slightly up year on year in part due to the increase in Outlook for 2021. RWE AG’s earnings prospects will largely depend on the business income at RWE Renewables and the first dividend we received from our 15 % stake performance of its subsidiaries. Our current assessment makes us confident of being able in E.ON held by a subsidiary of RWE AG. A counteracting effect resulted from RWE to achieve a net profit in 2021 that is slightly higher than in 2020. Supply & Trading closing the reporting year with income down on the previous one despite a very good trading performance. Corporate governance declaration in accordance with Section 289f and Section 315d of the German Commercial Code. On 15 February 2021, the Executive Board and the • Net interest deteriorated by €103 million to – €72 million. This was mainly due to a decline Supervisory Board of RWE AG issued a corporate governance declaration in accordance with in capital gains from the management of fund assets used to cover our pension Section 289f and Section 315d of the German Commercial Code. The declaration obligations. contains the Corporate Governance Report and has been published at www.rwe.com/corporate-governance-declaration. 65 RWE Annual Report 20201 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.8 Outlook We expect to maintain our good earnings position in 2021. However, we will probably Electricity production for 2021 largely sold forward. The future development of close the year significantly down on the previous one in our core business. In February, electricity prices will depend on a number of factors that are nearly impossible to predict. extreme weather conditions in Texas brought several wind farms to a standstill and At any rate, this would only have a limited impact on this year’s power plant margins as we led to substantial losses due to power purchases. Furthermore, we do not anticipate have sold forward most of our electricity generation for 2021 and secured the prices of the income from energy trading to be as high as in 2020. Outside of our core business, required fuel and emissions allowances. These transactions have been concluded up to we will benefit from higher margins of our lignite and nuclear power stations. In sum, we three years forward. Therefore, the realised electricity prices can differ significantly from the expect the Group to post adjusted EBITDA of between €2,650 million and €3,050 million. current market quotations. We sold forward the electricity produced by our German In light of the favourable medium and long-term earnings prospects of our core lignite-fired and nuclear power stations with long lead times. In doing so, we realised higher business, the Executive Board of RWE AG aims for a slightly increased dividend of prices for 2021 than for 2020. €0.90 for fiscal 2021. Changed recognition of tax benefits in the USA. As of the start of fiscal 2021, we changed the accounting treatment of tax benefits we receive for US wind and solar projects. As set Experts predict strong economic recovery. Despite extended lockdown measures and the out on page 37, renewable energy is subsidised via tax credits in the USA. Furthermore, slow progress in controlling the coronavirus pandemic, most economic research institutes plant operators can benefit from accelerated depreciation, referred to as tax benefits. We expect the economy to record a significant recovery in 2021. Current forecasts have the previously recognised them in taxes on income. By contrast, we consider the benefits of tax average rise in global economic output amounting to 5 %. Estimates for the Eurozone are of credits in other operating income. For the sake of consistency, we will take this approach to a similar order. Based on expert opinions, Germany and the Netherlands may well post a tax benefits as well. This drives up adjusted EBITDA. To ensure comparability, we will restate gain of about 4 %. UK prospects partially depend on whether the country can maintain its the figures for 2020 accordingly in our financial reporting for fiscal 2021. close economic ties with the EU after Brexit. If so, a 5 % rise in GDP should be feasible in the United Kingdom. Growth of approximately 4 % has been forecast for the USA. Power consumption expected to rise. Our expectations regarding this year’s electricity usage are based on the above economic outlooks. A significant resurgence of the economy will lead to increased demand for electricity. However, energy savings are expected to have a dampening effect. We currently anticipate demand for electricity in RWE’s core markets Germany, the Netherlands, the United Kingdom and the USA to be 2 % to 4 % up on 2020 levels. 66 RWE Annual Report 20201 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information Forecast € 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 2020 actual1 Outlook for 2021 Our outlook broken down by segment is as follows: 3,287 2,650 – 3,050 • Offshore Wind: Here, adjusted EBITDA is expected to total between €1,050 million and €1,250 million (last year: €1,069 million). The commissioning of the first turbines of the Triton Knoll wind farm in 2021 will have a positive effect. In addition, we anticipate being 2,728 1,800 – 2,200 able to fully consolidate the Rampion UK offshore wind farm during the year. As 1,069 1,050 – 1,250 farm by 20 % to 50.1 %. However, new project developments will likely result in added mentioned on page 42, we agreed with E.ON that we would increase our stake in the wind 524 621 539 559 1,823 1,257 50 – 250 500 – 600 150 – 350 800 – 900 costs. Moreover, if wind conditions normalise, utilisation of our UK offshore wind farms is expected to drop. • Onshore Wind / Solar: Adjusted EBITDA posted by this segment will probably total between €50 million and €250 million, closing down on last year’s level, which amounted to 1,150 – 1,550 €524 million including tax benefits. This is primarily due to the impact on earnings of the 750 – 1,100 state of emergency caused by the weather in February in the USA. As set out on page 46, 1 Some figures restated due to a change in the recognition of tax benefits in the USA (see commentary on the previous page). production outages caused by winter storms and icy rain required us to make short-term electricity purchases at extremely high prices. The resulting losses total a low to medium triple-digit million euro amount. We expect the commissioning of new wind and solar farms to have a positive impact on earnings. Furthermore, the sale of stakes in the Stella, 2021 adjusted EBITDA forecast of €2,650 million to €3,050 million. We expect to maintain Cranell, Raymond East and Raymond West onshore wind farms will lead to a capital gain. our good earnings position in 2021. However, we will probably close the year down on 2020 in This will be contrasted by higher expenses incurred to develop growth projects. part owing to losses in the Onshore Wind / Solar segment caused by the extreme weather in Texas at the beginning of the year. In addition, we anticipate a decline in earnings from energy • Hydro / Biomass / Gas: We expect this segment to achieve adjusted EBITDA of trading after the very strong performance in 2020. This will be contrasted by improved €500 million to €600 million for fiscal 2021. Compared to last year’s figure (€621 million) margins on electricity forward sales from which we will benefit outside of the core business in this represents a decline. One of the reasons is that income from the commercial the Coal / Nuclear segment. The RWE Group anticipates adjusted EBITDA for 2021 to total optimisation of power plant dispatch will probably be below the high level registered in between €2,650 million and €3,050 million. Last year’s figure including tax benefits stood at 2020. Moreover, we will not benefit from the contribution to earnings previously made by €3,287 million. We forecast the adjusted EBITDA of our core business to total between wood pellet manufacturer Georgia Biomass, which we sold in July 2020. However, the €1,800 million and €2,200 million (last year: 2,728 million). With expected operating curtailment of earnings last year from fire damage to the Eemshaven power station will depreciation and amortisation of about €1,500 million, the Group’s adjusted EBIT should be not recur. within the range of €1,150 million to €1,550 million (last year: €1,823 million). We anticipate adjusted net income, which excludes material special items, of €750 million to €1,100 million compared to €1,257 million last year (see page 57 for a definition of this key figure). 67 RWE Annual Report 20201 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Supply & Trading: In the long run, we anticipate annual average adjusted EBITDA here to Net debt not to exceed three times adjusted EBITDA. One of our key management be in the order of €250 million. We expect a figure in the range of €150 million to parameters is the ratio of net debt to adjusted EBITDA of the core business, also referred to €350 million for 2021. This would be much lower than the very high earnings posted as the leverage factor. This key figure is more indicative than total liabilities because it also last year (€539 million). reflects earning power and therefore our ability to meet our debt obligations. We set the upper limit for the leverage factor at 3.0, which we intend to comply with over the long term. • Coal / Nuclear: Adjusted EBITDA in this segment is expected to total between €800 million We expect to be able to satisfy this requirement for fiscal 2021. However, the leverage and €900 million (last year: €559 million). The significant year-on-year growth will result factor may well be higher than in 2020. from higher margins on forward sales of our electricity generation. However, we anticipate additional costs from the implementation of the German coal phaseout. Dividend for fiscal 2021. The Executive Board aims to pay a dividend of €0.90 per share for fiscal 2021. This represents an increase of €0.05 relative to the dividend proposal for Capital expenditure on property, plant and equipment markedly up on previous year. 2020. The reason for the planned increase are the bright medium and long-term earnings Capital expenditure on property, plant and equipment and intangible assets is estimated to prospects of our core business. be much higher than in 2020 (€2,285 million). A substantial amount of funds will be spent on the construction of the offshore wind farms Triton Knoll in the UK North Sea and Kaskasi near Heligoland, Germany. In addition, if we reach a positive investment decision on Sofia, we will start building the wind farm off the coast of east England. Other focal points of investment are onshore wind and solar projects in the USA and Europe. We plan to spend €200 million to €300 million outside of the core business in the Coal / Nuclear segment. These funds will primarily be used to maintain our power plants and opencast mines. 68 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.9 Development of risks and opportunities RWE’s risk exposure has improved steadily over the last few years. The main driver is A number of additional organisational units and committees have been entrusted with risk our transformation into a leading provider of electricity from renewables. The high management tasks: share of regulated income in this business makes us more profitable as well as more crisis-resistant. Furthermore, we benefit from the fact that the German coal phaseout • Financial risks and credit risks are managed by the Finance & Credit Risk Department of has finally been given a firm legal framework, which gives us planning certainty in RWE AG. our lignite business. Despite the coronavirus pandemic, we classify our current risks no higher than ‘medium’. We assess and manage our risks using our proven risk • The Accounting Department ensures that financial reporting is free of material management system, which we present in detail in this chapter. misstatements. It has an accounting-related internal control system for this purpose. A committee consisting of officers from Accounting and other departments of relevance to accounting assists in securing the quality of financial reporting. More detailed information Distribution of risk management tasks at RWE. Responsibility for Group risk management can be found on page 78. lies with the parent company RWE AG. Its Executive Board monitors and manages the Group’s overall risk. In addition, it determines the general risk appetite of RWE and • The Internal Audit & Compliance Department monitors compliance with RWE’s Code of defines upper limits for single risk positions. At the level below the Executive Board, the Conduct. Its primary objective is to prevent corruption. It reports to the CEO of RWE AG or, Controlling & Risk Management Department has the task of applying and constantly refining if members of the Executive Board are affected, directly to the Chair of the Supervisory the risk management system. It derives detailed limits for the individual business fields and Board and the Chair of the Audit Committee. operating units from the risk caps set by the Executive Board. Its tasks also include checking the identified risks for completeness and plausibility and aggregating them. In so doing, it • Risks from changes in commodity prices are monitored by RWE Supply & Trading in so far receives support from the Risk Management Committee, which is composed of the heads of as they relate to the conventional electricity generation, energy trading and gas the following five RWE AG departments: Controlling & Risk Management (Chair), businesses. Where these risks relate to the renewable energy business, they are managed Finance & Credit Risk, Accounting, Legal & Insurance, and Corporate Business Development. by RWE Renewables. The Controlling & Risk Management Department provides the Executive Board and the Supervisory Board of RWE AG with regular reports on the company’s risk exposure. • Strategies to limit market risks in conventional electricity generation must be approved by the Commodity Management Committee. This expert panel consists of the CFO of RWE AG, members of the Board of Directors of RWE Supply & Trading and a representative of the Controlling & Risk Management Department. 69 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information • We also have a committee tasked with mitigating market risks associated with the renewable energy business. The Renewables Commodity Management Committee consists of the CFO of RWE AG, members of the management of RWE Renewables and Potential damage1 a representative of the Controlling & Risk Management Department. RWE AG risk matrix • The strategic guidelines for the management of financial assets (including the funds held by RWE Pensionstreuhand e. V.) are determined by the Asset Management Committee. The following individuals belong to it: the CFO of RWE AG, the Managing Director in charge of finance at RWE Supply & Trading, the heads of the following departments: Finance & Credit Risk, Investor Relations, Portfolio Management / Mergers & Acquisitions and – from the last department in the list – the head of Financial Asset Management. Category V Category IV Category III Category II Under the expert management of the aforementioned organisational units, RWE AG and its operating subsidiaries are responsible for identifying risks early, assessing them correctly Category I and managing them in compliance with corporate standards. Internal Audit regularly assesses the quality and functionality of our risk management system. Last year, our internal audit system was reviewed by an external auditor in accordance with the IDW PS 983 standard and certified to the standard. Risk identification and assessment. Risks and opportunities are defined as negative or positive deviations from expected figures. Their management is an integral and continuous 1 % ≤ P ≤ 10 % 10 % < P ≤ 20 % 20 % < P ≤ 50 % 50 % < P Probability of occurrence (P) Low risk Medium risk High risk part of operating processes. We assess risks every six months, using a bottom-up analysis. Potential damage1 We also 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 € million Earnings risks Potential impact on net income (X) Indebtedness / equity risks Potential impact on net debt and equity (Y) bodies are updated on the Group’s risks once a quarter. Category V 8,000 ≤ X 8,000 ≤ Y Category IV 1,500 ≤ X < 8,000 4,000 ≤ Y < 8,000 Our risk analysis normally covers the three-year horizon of our medium-term plan, but can Category III 600 ≤ X < 1,500 extend beyond that in individual cases. We measure the potential damage based on the possible effects on net income, net debt and equity. In doing so, we take hedges into account. We define the potential damage as the deviation from the budgeted figure in Category II Category I 300 ≤ X < 600 X < 300 2,000 ≤ Y < 4,000 1,000 ≤ Y < 2,000 Y < 1,000 question, aggregated over the three-year planning horizon. 1 Aggregated over the three-year medium-term plan (2021 to 2023). 70 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information We display the material risks using a matrix (see chart on the preceding page) in which they of which is not sold at firm conditions, causing them to also bear a market risk. The risk of are categorised by potential damage and probability of occurrence. Risks that share the having to recognise impairments due to corona-induced declines in margins is recorded in same cause are aggregated to a single risk if possible. To clearly assign them to the matrix the ‘other risks’ class, which we therefore reclassified from ‘low’ to ‘medium’. fields, we have established thresholds for net income, net debt and equity, which are oriented towards the RWE Group’s ability to bear risks. They are presented in the table below the matrix. Depending on their position in the matrix, we distinguish between low, medium Risk classes and high risks. Based on this systematic risk identification, we determine whether there is a need for action and initiate measures to mitigate the risks if necessary. Main risks for the RWE Group. Depending on their causes, our risks can be classified into seven classes, which are shown in the table on the right. The highest individual risk determines the classification of the risk of the entire risk class. The highest classification of Market risks Regulatory and political risks Legal risks Operational risks our risks is currently ‘medium’. By contrast, in the previous year, we had identified a high Financial risks regulatory risk because of the uncertainty regarding the conditions of the German coal Creditworthiness of business partners phaseout. The Coal Phaseout Act passed in mid-2020 and the public law contract between Other risks the government and the affected lignite companies have created a clear legal framework. However, the legally mandated compensation for the early closure of lignite assets is subject Classification of the highest single risk 31 Dec 2020 31 Dec 2019 Medium Medium Low Medium Medium Medium Medium Medium High Low Medium Medium Medium Low to state-aid approval by the European Commission. As the compensation envisaged for us As set out earlier, the focus of the risk analysis described in this chapter lies on the three- is much lower than our actual financial burden, we are confident that the compensatory year horizon of our medium-term plan. The Task Force on Climate-related Financial payments will not be classified as unlawful aid. Increased political pressure on our lignite Disclosures (TCFD), a panel of experts, recommended in 2017 that companies consider business and the further acceleration of Germany’s coal phaseout can generally not be time horizons that go far above and beyond this when identifying and assessing climate- ruled out. related risks. RWE implements the TCFD proposals. We explain how we do this in our 2020 Sustainability Report, which will be published in April 2021 and will then be available at Regulatory unpredictability has decreased in general, but the coronavirus pandemic has www.rwe.com/sustainability-report. introduced a new cause for uncertainty. We modelled the potential consequences of COVID-19 for RWE in an analysis of scenarios in March 2020 and updated the findings in In this section, we provide commentary on the main risks and opportunities we have November. We are exposed to the risk of new build projects being delayed and a significant identified for this and the next two years and explain what measures have been taken to drop in economic output depressing electricity prices. Both these developments were counter the threat of negative developments. already witnessed in 2020. Negative price effects would not only impact on our conventional power stations, but also on those wind farms, the entire or partial generation 71 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Market risks. In most of the countries in which we are active the energy sector is RWE Supply & Trading plays a central role when it comes to managing commodity price characterised by the free formation of prices. Declines in quotations on wholesale risks. It functions as the Group’s interface to the global wholesale markets for electricity electricity markets can cause generation assets to become less profitable. This also relates to renewable energy assets that are not subsidised with fixed feed-in payments. Negative price developments can cause us to recognise impairments, which are also and energy commodities. On behalf of our power plant companies, RWE Supply & Trading markets large portions of our generation position and purchases the fuel and CO2 certificates needed to produce electricity. Since RWE Supply & Trading acts as the recorded as market risks with certain exceptions. internal transaction partner it is easier for us to limit the risks associated with price volatility Power and gas purchase agreements with conditions that do not depend on the reduce risks. In compliance with risk thresholds, the company also takes commodity on energy markets. However, the trading transactions are not exclusively intended to development of wholesale prices expose us to the risk of having to pay more for the positions to achieve a profit. product than we can earn when selling it. This may force us to form provisions to cover this risk. We have identified such a risk inherent in the two contracts we concluded to purchase Our risk management system for energy trading is firmly aligned with best practice as electricity from the Datteln 4 hard coal-fired power plant in 2005 and 2006. Operated by applied to the trading businesses of banks. As part of this, transactions with third parties German energy group Uniper, the station was commissioned in the summer of 2020, are concluded only if the associated risks are within approved limits. There are guidelines ten years later than planned. We were unsuccessful in taking legal recourse against the governing the treatment of commodity price risks and associated credit risks. Our continuation of the agreements. We are currently negotiating certain contractual subsidiaries constantly monitor their commodity positions. Risks associated with trades conditions with Uniper and considering taking further legal steps. Our long-term gas conducted by RWE Supply & Trading for its own account are monitored daily. purchase agreement with Russian energy group Gazprom sets dates for regular reviews, during which we can negotiate contractual changes depending on market conditions. In The Value at Risk (VaR) is of central importance for risk measurement in trading and the past, this has enabled us to mitigate our earnings risk exposure from the contract. It finance. It specifies the maximum loss from a risk position not exceeded with a cannot be ruled out that the results of future reviews fall short of our expectations. Vice predetermined probability over a predefined period of time. RWE’s VaR figures are versa, however, we also stand the chance of enforcing conditions that are more generally based on a confidence interval of 95 % and an observation period of one day. favourable than anticipated. This means that, with a probability of 95 %, the daily loss will not exceed the VaR. We assess the price risks to which we are exposed on the procurement and supply The VaR for the price risks of commodity positions in the trading business of markets taking account of current forward prices and expected volatility. For our power RWE Supply & Trading must remain below a certain daily limit. The maximum allowable plants, we limit the risks by selling most of the electricity forward and securing the prices of the fuel and CO2 emission allowances needed for its generation. We also use financial instruments to hedge our commodity positions. In the consolidated financial statements, amount in the fiscal year that just ended was €40 million. The actual daily maximum was €32 million and the average for the year was €18 million. In addition, limits derived from the aforementioned VaR thresholds have been set for every trading desk. Furthermore, we such instruments, including those serving the purpose of reducing interest and currency develop extreme scenarios and factor them into stress tests, determine their impact on risks, are usually presented through the statement of on-balance-sheet hedges. More earnings, and take countermeasures if we deem the risks to be too high. detailed information on this can be found on page 118 in the Notes. 72 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information The management of our gas portfolio and the liquefied natural gas (LNG) business is • Regulatory and political risks. Ambitious emission reduction targets have caused the pooled in a dedicated organisational unit at RWE Supply & Trading. Last year, the VaR cap governments in our core markets to intervene in the energy sector repeatedly. The most for these activities was €14 million. The headroom actually utilised was €12 million. The recent example of this is Germany’s Coal Phaseout Act, on which we have commented on average VaR for the year was €6 million. page 37et seq. It envisages gradually reducing coal-fired electricity generation to zero by 2038. In exchange for closing our lignite assets early, we will receive €2.6 billion in We also apply the VaR concept to measure the extent to which the commodity price risks compensation. The damage we will actually suffer is much higher. Nevertheless, we find that we are exposed to outside the trading business can affect the RWE Group’s adjusted this statutory regulation to be acceptable, because it gives us more planning certainty for EBITDA. To this end, we calculate the overall risk for the Group on the basis of the our lignite business. We now classify our regulatory and political risks as ‘medium’ instead commodity risk positions of the individual companies; this overall risk mainly stems from of ‘high’. The compensatory payments for the exit from the lignite business are subject to power generation. The majority of our generation position is already hedged for 2021. approval under EU state aid law. Despite the new legislation, it cannot be ruled out that Opportunities for additional profits arise, because we are able to flexibly adapt our power plant deployment to short-term market developments. policymakers continue to increase pressure on the lignite sector, for instance by introducing CO2 price floors or establishing extremely restrictive emission limits. In addition, more ambitious climate targets for 2030 could make the next federal In the UK generation business, our earnings not only depend on the development of the government accelerate the coal phaseout. price of electricity, fuel and emission allowances, but also on the level of the payments we receive for participating in the national capacity market. The payments are determined in The coal phaseout in the Netherlands was enshrined in law in 2019. The country’s exit annual auctions and fluctuate depending on supply and demand (see page 45). roadmap prohibits power plants built in the 1990s from using coal from no later than We are also exposed to market risks in the gas storage business. As set out on page 27, and Eemshaven power plants will have to stop coal-based generation at the end of 2024 the realisable margins depend significantly on the volatility of gas prices. If the short-term and 2029, respectively. Unlike in Germany, it is not envisaged that we will receive and seasonal price differences are large, they can be taken advantage of to generate compensation for this. We mitigated our risk exposure from coal-based generation early substantial income. If they are insignificant, then so is the income. The German gas on by converting Amer 9 and Eemshaven to biomass co-firing. We are receiving state storage business is currently characterised by overcapacity and significant pressure on subsidies for the investment outlay and the added cost of procuring fuel. However, the margins. However, we are confident that market conditions will improve in the long run. subsidies fall clearly short of covering the additional cost of converting the stations to Should they deteriorate, we may have to recognise impairment losses for our storage 100 % biomass utilisation. The legally mandated coal phaseout could thus force us to 2025 onwards. For younger stations, the ban starts in 2030. This means that our Amer 9 facilities. close the stations early. Therefore, we believe that our ownership rights have been violated. As the government has not offered us compensation for our financial Our biggest market risks remain unchanged in the ‘medium’ category. disadvantages, in February 2021 we initiated arbitration proceedings under the Energy Charter Agreement against the Netherlands before the International Centre for Settlement of Investment Disputes in Washington, USA. 73 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information We are also exposed to risks in the field of nuclear energy, albeit to a much lesser extent Despite the aforementioned imponderables, the overall assessment of our regulatory and than in the past. Since we made contributions to the German nuclear energy fund in the political risks has improved from ‘high’ to ‘medium’. The main reason for this is the middle of 2017, the state has assumed complete responsibility for the interim and final establishment of a clear framework for the German coal phaseout. storage of our radioactive waste. We are still exposed to cost risks associated with disposal tasks which remain within our remit. For example, it cannot be ruled out that the • Legal risks. Individual RWE Group companies are involved in litigation and arbitration dismantling of nuclear power stations will be more expensive than estimated and we will proceedings due to their operations or M & A transactions. Out-of-court claims have been therefore have to top-up our provisions for this. However, we also see the opportunity to filed against some of them. Furthermore, Group companies are directly involved in various leverage synergies and cut costs. procedures with public authorities or are at least affected by their outcomes. To the extent necessary, we have accrued provisions for possible losses resulting from pending Although the renewable energy business is characterised by fairly stable framework proceedings before ordinary courts and arbitration courts. conditions and wide public acceptance, imponderables exist in this area as well. Adjustments to state subsidy schemes may result in reductions in payments and new Risks may also result from exemptions and warranties that we granted in connection with projects losing their appeal. This can lead to investment undertakings being broken off. the sale of assets. Exemptions ensure that the seller covers the risks that are identified It is also conceivable that firmly pledged state payments may be cut retrospectively. In within the scope of due diligence, the probability of occurrence of which is, however, the dialogue we maintain with policymakers, we point out that companies which invest in uncertain. In contrast, warranties cover risks that are unknown at the time of sale. These building sustainable, climate- friendly energy infrastructure need reliable framework hedging instruments are standard procedure in sales of companies and equity holdings. conditions. We currently have low exposure to legal risks. This assessment did not change compared Even in the present regulatory environment, we are exposed to risks associated with, for to the previous year. instance, approvals when building and operating production facilities. This particularly affects our opencast mines, power stations and wind farms. The danger here is that • Operational risks. RWE operates technologically complex, interconnected production approvals are granted late or not at all and that granted approvals are withdrawn facilities such as conventional power stations and wind farms. Damage and outages can temporarily or for good. weigh heavily on earnings, as recently demonstrated by the severe cold snap in the US state of Texas (see page 46). When production facilities are built and modernised, delays Certain statutory regulations to which we must adhere can be interpreted in various ways and cost increases can occur, for example due to accidents, material defects, late and are therefore in need of legal clarification. One example is the regulation which deliveries, unfavourable weather conditions or time-consuming approval processes. In exempts us from paying an apportionment under the Renewable Energy Act (EEG) for such cases, there is a danger that the plants become more expensive and they contribute electricity that we consume ourselves in our German power stations and opencast mines. to earnings later than planned. Furthermore, delays of renewable energy projects can be However, the legal situation surrounding the regulation is vague, for example with regard disadvantageous to the level of subsidies they receive. We counter the described risks to the EEG exemption of leased assets. There is a danger that the options to benefit from through diligent plant and project management as well as high safety standards. We also the regulation may be limited by the Germany’s highest court and that back payments regularly maintain our facilities and take out insurance policies if economically viable. may even have to be made for previous years. 74 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information In the past fiscal year, some construction schedules could not be adhered to, in part due Our business processes are supported by secure data processing systems. Nevertheless, to the coronavirus pandemic. This primarily affected onshore wind projects in the USA, we cannot rule out a lack of availability of IT infrastructure or a breach in data security. exposing us to the risk of a reduction in tax credits for assets that could not be Our high security standards are designed to prevent this. In addition, we regularly invest in commissioned by the end of 2020. However, in view of the unusual circumstances, the hardware and software upgrades. US government extended the deadlines, enabling wind farms that are completed in 2021 to receive the full subsidy (see page 37). Due to our dependence on suppliers, however, Despite corona-induced imponderables, as in the previous year, our operational risks are projects may incur further delays. So far, the coronavirus pandemic has only had a minor classified as ‘medium’. impact on the operation of our assets. Thanks to comprehensive preventive measures and forward-looking emergency plans, we were able to keep all major operational • Financial risks. Changes in key financial indicators such as interest rates, foreign processes up and running. In light of the successful development of vaccinations, we are exchange rates, securities prices and rates of inflation can have a major impact on our confident that the spread of the infection will soon come under control. We will keep our net worth and earnings. safety measures in place as long as necessary. The shift of our power production to renewable energy sources like the wind and sun to reductions in the prices of the securities we hold. This primarily relates to fixed-interest increases the impact of the weather on our business. For example, extended lulls can bonds. Last year, the VaR for the interest rate-related price risk of capital investments was We are exposed to various interest rate risks. For example, rises in interest rates can lead cause generation volumes and earnings of wind farms to fall significantly behind targets €3.9 million on average at RWE AG. in certain fiscal years. We limit the effects of the weather on the Group’s income in part through the geographic diversification of our business. This increases the likelihood of Moreover, increases in interest rates cause our financing costs to rise. We measure this unfavourable meteorological conditions at one site being offset by favourable ones at risk using the Cash Flow at Risk (CFaR), applying a confidence level of 95 % and a holding another. period of one year. The average CFaR at RWE AG in 2020 was €25.0 million. RWE has ambitious goals in relation to renewable energy and has increased its Furthermore, market interest rates have an effect on our provisions, as they are the point investment budgets significantly. We try to ensure that our new-build projects and of reference for the discount rates used for determining the net present values of acquisitions satisfy our return requirements. Nevertheless, we cannot rule out that income obligations. This means that, all other things being equal, provisions rise when market achieved through our projects falls short of expectations or prices paid for acquisitions interest rates fall and vice versa. On pages 154 et seqq. of the Notes, we present the prove to be too high retrospectively. Mounting competition in the renewable energy effects of changes in interest rates on the net present values of our pension obligations business in particular can be detrimental to project income. We prepare our investment and on the nuclear and mining provisions. decisions by conducting extensive analyses to try and map the financial and strategic effects as realistically as possible before taking investment decisions. Moreover, RWE has specific accountability provisions and approval processes in place to prepare and implement the decisions. 75 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information In addition to interest rates, the general price level also affects the amount of provisions. The conditions at which we can finance our business on the debt capital market are in Rising inflation can force us to make a considerable upward adjustment to the present part dependent on the credit ratings we receive from international rating agencies. As set value of the obligations. Price increases are particularly detrimental when they are above out on page 60, Moody’s and Fitch place our creditworthiness in the investment grade average in sectors from which we procure products and services for nuclear waste category. If the agencies lower our credit rating, we may incur additional costs if we have disposal and recultivating opencast mine areas. to raise debt capital. This would probably also increase the liquidity requirement when pledging collateral for forward transactions. However, we believe that such a scenario is We are exposed to foreign exchange risks primarily owing to our business activities in the unlikely. Both rating agencies are of the opinion that RWE has become more financially UK and the USA. Furthermore, energy commodities such as coal and oil are traded in stable as a result of its transformation into a leading renewable energy company. Moody’s US dollars. Companies which are overseen by RWE AG have their currency risks managed upgraded our rating outlook to ‘positive’ in March 2020, which makes us believe that we by the parent company. RWE AG aggregates the risks to a net financial position for each stand a chance of receiving a more favourable credit rating. currency and hedges it if necessary. We calculated an average VaR for RWE AG’s foreign currency position in 2020 of €1.2 million. The assessment of our creditworthiness by rating agencies, banks and capital investors depends in part on the level of our net debt. Our goal is to ensure that it does not exceed The securities we hold in our portfolio typically include shares. We currently hold a 15 % three times the adjusted EBITDA of our core business. Due to our extensive investments in stake in E.ON, which had a fair value of €3.6 billion at the end of 2020. Therefore, changes expanding renewable energy, net debt could temporarily be above budget. This primarily in the quotation of the E.ON share can affect our financial strength significantly. affects fiscal years with cash inflows from operating activities or sales of stakes in projects Risks and opportunities from changes in the price of securities are controlled by a indebtedness within the target range. The additional financial headroom achieved professional fund management system. Range of action, responsibilities and controls are through the capital increase in August 2020 is helpful in this respect. set out in internal guidelines which the Group companies are obliged to adhere to when concluding financial transactions. All financial transactions are recorded using special We classify our financial risks as ‘medium’. This assessment has not changed since last software and are monitored by RWE AG. year. that are below average. Nevertheless, we are confident that we can maintain our Collateral pledged for forward transactions also harbours a risk. The amount of collateral • Creditworthiness of business partners. Our business relations with key accounts, depends on the extent to which the contractually agreed prices deviate from market suppliers, trading partners and financial institutions expose us to credit risks. Therefore, quotations as of the respective cut-off date. These differences can be substantial. In recent times, the market prices of energy commodities, e. g. CO2 emission allowances, have fluctuated significantly, due in part to the coronavirus pandemic. Changes of this we track the creditworthiness of our partners closely and assess their credit standing based on internal and external ratings, both before and during the business relationship. Transactions that exceed a certain size and all trading transactions are subject to credit degree can lead to substantial short-term cash outflows, but can also present the limits, which we determine before the transaction is concluded and adjust if necessary, for opportunity to receive substantial collateral from contracting parties, resulting in a instance in the event of a change in the business partner’s creditworthiness. At times, we temporary increase in equity. request cash collateral or bank guarantees. In the trading and financing business, credit 76 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information risks and the utilisation of the limits are measured daily. We agree on collateral when As shown by the commentary in this chapter, we no longer have any risks classified as ‘high’. concluding over-the-counter trading transactions. Furthermore, we enter into framework The German Coal Phaseout Act and the compensation claims against the federal agreements, e. g. those of the European Federation of Energy Traders. For financial government that it has written into law have substantially reduced the uncertainty of our derivatives, we make use of the German master agreement for forward financial lignite business. In the previous year, we had identified a major risk here. So far, RWE has only transactions or the master agreement of the International Swaps and Derivatives been affected by the onset of the COVID-19 pandemic to a limited extent, with the Association. pandemic leading to delays in projects, among other things. If the virus cannot be controlled effectively in the near future, we may experience further delays. Moreover, there is a danger The coronavirus pandemic has created economic problems for many companies, that the reduced economic output will result in lower electricity prices, causing our potentially including business partners of RWE. This is why we are monitoring critical generation margins to shrink. However, we classify our pandemic-related risk exposure no branches of industry more closely. Furthermore, we are extremely careful when entering higher than ‘medium’. In this regard, it is proving advantageous once again that our into new business relationships and extending existing ones and assign customers lower renewable energy business gives us a strong and crisis-proof source of income. Our credit limits where necessary. We currently do not expect any material financial losses due substantial investments in new wind and solar farms will make this pillar even stronger. to corona-induced insolvencies. As in the past, our risks stemming from the creditworthiness of our business partners do not exceed the ‘medium’ category. At the same time, our solid financial management ensures that RWE remains on a safe course. By analysing the effects of risks on our liquidity and pursuing a conservative • Other risks. This is the class in which we record the potential effects of damage to our financing strategy, we ensure that we can meet our payment obligations punctually. We reputation, compliance infringements and criminal acts. The risk of a COVID-19-driven have considerable liquid funds and great leeway in terms of debt financing, thanks to the reduction in energy consumption leading to low electricity prices which, in turn, forces us Debt Issuance Programme, the Commercial Paper Programme and the syndicated credit to recognise impairments for generation assets has also been recorded in this category. line (see page 59). The capital increase conducted in August 2020 has made us more Therefore, other risks have risen from ‘low’ to ‘medium’. financially flexible. We budget our liquidity with foresight, based on the short, medium and long-term financing needs of our Group companies, and have a significant amount of RWE’s risks and opportunities: general assessment by management. The RWE Group’s minimum liquidity on a daily basis. risk exposure has improved significantly in the last few years. As a result of the asset swap with E.ON, which we completed successfully in 2020, we have become a leading renewable Thanks to the measures for safeguarding our financial and earning power over the long energy company. This has increased the share of stable regulated income considerably and term and our comprehensive risk management system, we are confident that we can made us more financially robust. Moreover, the gradual shift of our generation portfolio manage the current risks to RWE. At the same time, we are establishing the prerequisites for from fossil fuels to renewables also helps us to limit our political and regulatory risks. By ensuring that this remains the case in the future. aiming to be carbon neutral by 2040, we are demonstrating that we want to expedite the decarbonisation of the energy sector, thereby increasing our acceptance among politicians, capital lenders, customers and other stakeholder groups. 77 RWE Annual Report 20201 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information Accounting-related internal control system: statements in accordance with Sec. 289, We subject the ICS to a comprehensive review every year. As a first step, we examine Para. 4, and Sec. 315, Para. 4 of the German Commercial Code. Our financial reporting is whether the risk situation is presented appropriately and whether suitable controls are in exposed to the risk of misrepresentations that could have a significant influence on the place for the identified risks. In a second step, we test the effectiveness of the controls. If the decisions made by their addressees. For example, stated earnings that are too high can ICS reviews pertain to accounting-related processes, e. g., the preparation of financial cause capital investors to invest in a company. In RWE’s Code of Conduct, we have statements or consolidation, they are conducted by employees from the Accounting undertaken to inform the public completely, objectively, accurately, clearly and in a timely Department. The appropriateness and effectiveness of the controls are certified by an manner, in compliance with capital market law. We use a series of tools to meet this accounting firm for processes handled by service centres on our behalf, for example invoice ambition. Examples of this are our groupwide accounting policy and the high minimum processing. The representatives of the finance, human resources, procurement, trading, and standards to which we subject the IT systems used to record and process accounting- IT functions document whether the agreed ICS quality standards are adhered to by their related data. respective areas. Our Internal Audit & Compliance Department is also involved in the ICS reviews. The results of the reviews are documented in a report to the Executive Board of Furthermore, we use an accounting-related Internal Control System (ICS) for quality RWE AG. The review conducted in 2020 once again demonstrated that the ICS is effective. assurance purposes. The ICS aims to detect potential errors and misrepresentations that result from non-compliance with accounting standards. Designing the ICS and reviewing its Within the scope of external reporting, the members of the Executive Board of RWE AG take effectiveness are under the responsibility of the Accounting Department of RWE AG. The a half-year and full-year balance-sheet oath, confirming that the prescribed accounting department can apply groupwide rules in performing these tasks. In addition, it receives standards have been adhered to and that the financial statements give a true and fair view assistance from the ICS Committee, the objective of which is to ensure that the ICS is of the net worth, financial position and earnings. When in session, the Supervisory Board‘s applied throughout the Group following uniform principles and meeting high ambitions in Audit Committee regularly concerns itself with the effectiveness of the ICS. Once a year, the terms of correctness and transparency. The Committee consists of representatives from the Executive Board of RWE AG submits a report on this to the Committee. Accounting, Controlling & Risk Management and Internal Audit & Compliance Departments, along with officers from the human resources, procurement, trading, finance, taxes and IT functions, which are highly relevant to accounting. 78 RWE Annual Report 20201 To our investors 2 Combined review of  operations Disclosure relating to German takeover law 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.10 Disclosure relating to German takeover law The following disclosure is in accordance with Section 315a, Paragraph 1 and Section Subject to the approval of the Supervisory Board, the Executive Board may waive 289a, Paragraph 1 of the German Commercial Code as well as with Section 176, subscription rights: 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 • to prevent fractional amounts resulting from the subscription ratio; 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. • to issue shares in exchange for contributions in kind for the purposes of mergers or acquisitions of companies, parts of companies, operations, or of stakes in companies; Composition of subscribed capital. RWE AG’s capital stock amounts to • in the event of a cash capital increase if the price at which the new shares are issued is not €1,731,123,322.88 and is divided among 676,220,048 no-par-value bearer shares. significantly lower than the price at which shares are quoted on the stock market and the As set out on page 42, in August 2020, with the approval of the Supervisory Board, the portion of the capital stock accounted for by the new shares, for which subscription rights Executive Board issued 61,474,549 new RWE shares to institutional investors in exchange are waived, does not exceed 10 % in total; for cash contributions, waiving subscription rights. This increased the capital stock by €157,374,845.44, or 10 %. • and to offer shares to potential holders of convertible or option bonds commensurate to the rights to which they would be entitled on conversion of the bond or on exercise of the Executive Board authorisation to issue new shares. The capital increase was based on an option. authorisation issued by the Annual General Meeting on 26 April 2018, which contains the following main provisions: The Executive Board is authorised, subject to the approval of the Supervisory Board, to determine the further details and conditions of the share issuance. In sum, the capital stock The Executive Board is authorised to increase the company’s capital stock, subject to may not be increased by more than 20 % through the issuance of new shares waiving the Supervisory Board’s approval, by up to €314,749,693.44 until 25 April 2023, subscription rights. through the issuance of up to 122,949,099 new bearer shares in return for contributions in cash or in kind (authorised capital). This authorisation may be exercised in full or in part, On 18 / 19 August 2020, RWE exercised the option of conducting a cash capital increase or once or several times for partial amounts. In principle, shareholders are entitled to waiving subscription rights up to the upper limit of 10 %. Half of the authorised capital, i. e. a subscription rights. maximum of €157,374,848, may still be used for other capital measures. This corresponds to an issuance of up to 61,474,550 RWE shares. 79 RWE Annual Report 20201 To our investors 2 Combined review of  operations Disclosure relating to German takeover law 3 Responsibility statement 4 Consolidated financial statements 5 Further information Shares in capital accounting for more than 10 % of voting rights. As of 31 December Shares purchased in this way may then be cancelled. Furthermore, they may be transferred 2020, no holding in RWE AG exceeded 10 % of the voting rights. to third parties in connection with mergers or acquisitions of companies, parts of Limitation of share transfers. Within the scope of RWE’s employee share plan, fulfil its obligations resulting from employee share schemes or settle rights arising from 314,760 RWE shares were issued to staff in Germany in the financial year that just ended. convertible or option bonds. In the aforementioned cases, shareholder subscription rights The beneficiaries may only freely dispose of the shares after 31 December 2021. RWE also are waived. These authorisations may be exercised in full or in part, or once or several times companies, operations, or of stakes in companies. The company may also use the shares to has employee share schemes in the United Kingdom. Participating companies are for partial amounts. RWE Generation UK plc, RWE Technology UK Limited and RWE Supply & Trading GmbH UK Branch. In 2020, a total of 17,905 RWE shares were purchased under the UK plans. These Pursuant to the authorisation of 26 April 2018, the shares bought back could be sold for shares are also subject to a restriction on disposal, which lasts five years from the grant cash via other channels. This option no longer exists because the shares issued to conduct date. the capital increase count towards the upper limit of 10 % of the capital stock for which the authorisation was granted. For the same reason, it is also no longer possible to transfer Appointment and dismissal of Executive Board members / amendments to the Articles repurchased shares to holders of convertible or option bonds if these bonds were issued of Incorporation. Executive Board members are appointed and dismissed in accordance waiving subscription rights and in exchange for cash contributions. In addition, the shares with Sections 84 et seq. of the German Stock Corporation Act in conjunction with Section bought back cannot be used to settle subscription rights which holders of convertible or 31 of the German Co-Determination Act. Amendments to the Articles of Incorporation are option bonds would have if they exercised the options attached to bonds in exchange for made pursuant to Section 179 et seqq. of the German Stock Corporation Act in conjunction RWE shares. with Article 16, Paragraph 5 of the Articles of Incorporation of RWE AG. According to the aforementioned provision in the Articles of Incorporation, unless otherwise required by law Effects of a change of control on debt financing. Our debt financing instruments often or the Articles of Incorporation, the Annual General Meeting shall adopt all resolutions by a contain clauses that take effect in the event of a change of control. Such a provision is in simple majority of the votes cast or – if a capital majority is required – by the simple majority place e. g. in respect of our €5 billion syndicated credit line. It essentially has the following of the capital stock represented when the resolution is passed. Pursuant to Article 10, content: in the event of a change of control or majority at RWE, drawings are suspended Paragraph 9 of the Articles of Incorporation, the Supervisory Board is authorised to pass until further notice. The lenders shall enter into negotiations with us on a continuation of the resolutions in favour of amendments to the Articles of Incorporation that only concern credit line. Should we fail to reach an agreement with the majority of them within 30 days formal matters, without having a material impact on the content. from the change of control, the lenders may cancel the line of credit. RWE AG authorisation to implement share buybacks. Furthermore, the Annual General Meeting on 26 April 2018 authorised the Executive Board of RWE AG to conduct share buybacks subject to the approval of the Supervisory Board until 25 April 2023, said buybacks accounting for up to 10 % of the capital stock as of the effective date of the resolution or as of the exercise date of the authorisation if the capital stock is lower on this date. At the Executive Board’s discretion, this may be done on the stock exchange or via a public purchase offer. 80 RWE Annual Report 20201 To our investors 2 Combined review of  operations Disclosure relating to German takeover law 3 Responsibility statement 4 Consolidated financial statements 5 Further information Change-of-control clauses also exist with regard to our bonds. The following rule applies to By contrast, the current employment contracts of Rolf Martin Schmitz and Markus Krebber a senior bond maturing in 2037, a small residual amount of which remained with RWE when still have a change-of-control clause. It gives them a special right of termination in the event we transferred our senior bonds to innogy in 2016: in the event of a change of control in that a change of control puts them at a major disadvantage. In such a case, they are free to conjunction with a drop in RWE AG’s credit rating below investment-grade status, creditors resign for cause from their position within six months of the change of control by giving three may demand immediate redemption. With regard to subordinated hybrid bonds, we have months’ notice. In addition, they can request the termination of their employment contract the right to cancel them within the defined change-of-control period in such cases; if this and receive a one-off payment. The amount of the one-off payment shall correspond to the does not occur, the annual yield of the hybrid bonds increases by 500 basis points. compensation that would have been due until the end of the contractually agreed term of service, but no more than three times the total contractual annual remuneration, excluding Consequences of a change of control for Executive Board and executive remuneration. share-based payments. The current version of the German Corporate Governance Code dated 16 December 2019 recommends that no commitments to (additional) benefits be made in the event of the early Change-of-control provisions also apply to the share-based payment of the Executive termination of an employment contract by a member of the Executive Board as a result of Board and executives. All performance shares granted on a preliminary basis for the fiscal a change of control. We adhere to this principle in all of the new employment contracts. year underway at the time of the change of control shall expire without replacement or Michael Müller and Zvezdana Seeger, who joined the Executive Board as of 1 November 2020, compensation. Conversely, rights in connection with performance shares for past fiscal do not have a special right of termination or severance entitlements in the event of a years, for which no payout has been effected yet, shall be preserved. change of control. The same will apply as of 1 May 2021 to Markus Krebber when he succeeds Rolf Martin Schmitz as CEO. 81 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.11 Remuneration report Standards imposed on management and supervisory board compensation by the Supervisory Board members who concurrently hold several offices in this body only receive capital market have become higher. More than ever before, companies are expected to compensation for the highest- paid position. Remuneration is prorated if a Supervisory remunerate managing and monitoring bodies based on performance, while providing Board member only performs a function for part of a fiscal year. incentives for forward-looking sustainable action. RWE meets these demands. Nevertheless, we have refined the Executive Board remuneration system in close In addition to the remuneration paid, out-of-pocket expenses are refunded to the members co-operation with investors. We will present the new rules to the 2021 Annual General of the Supervisory Board. Some Supervisory Board members also receive income from the Meeting for approval. The following commentary focuses on the compensation exercise of Supervisory Board mandates at subsidiaries of RWE AG. regulations for fiscal 2020. Structure and level of Supervisory Board remuneration The members of the Supervisory Board imposed on themselves the obligation, subject to any commitment to relinquish their pay, to use 25 % of the total annual compensation (before taxes) to buy RWE shares and to hold them for the duration of their membership of the Supervisory Board of RWE AG. Last year, all of the members who do not relinquish their The remuneration paid to the members of the Supervisory Board for fiscal 2020 was compensation met this self-imposed obligation regarding their compensation for 2019. based on a resolution passed by the 2013 Annual General Meeting and is governed by the provisions of the Articles of Incorporation of RWE AG. It complies with all of the In total, the remuneration of the Supervisory Board (excluding the reimbursement of recommendations of the current version of the German Corporate Governance Code out-of-pocket expenses) amounted to €2,880,000 in fiscal 2020 (previous year: (GCGC) which was published on 16 December 2019. €3,304,000). Of this sum, €480,000 (previous year: €465,000) was remuneration paid for mandates on committees of the Supervisory Board and €100,000 (previous year: The Chairman of the Supervisory Board of RWE AG receives fixed remuneration of €543,000) was remuneration paid for mandates at subsidiaries of RWE AG. €300,000 per fiscal year. His Deputy receives €200,000 per fiscal year. The other members of the Supervisory Board receive fixed remuneration of €100,000 and additional In accordance with Section 113 of the German Stock Corporation Act, we will present a compensation for committee mandates according to the following rules: members of the Supervisory Board remuneration scheme to the Annual General Meeting on 28 April 2021 Audit Committee receive additional remuneration of €40,000. This payment is increased to for approval. We are considering proposing to the shareholders an increase in remuneration €80,000 for the Chair of this committee. With the exception of the Nomination Committee, for committee work. the members of which do not receive additional remuneration, the members and the Chairs of all the other Supervisory Board committees receive an additional €20,000 and €40,000 The remuneration of all individuals who served on the Supervisory Board in 2019 and / or in remuneration, respectively. Remuneration for a committee mandate is only paid if the 2020 is shown in the table overleaf. committee is active at least once in the fiscal year. 82 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Supervisory Board remuneration1 Fixed remuneration Remuneration for committee offices Remuneration for mandates at subsidiaries2 Total remuneration3 € ‘000 2020 2019 2020 2019 2020 Dr. Werner Brandt, Chairman Frank Bsirske, Deputy Chairman Michael Bochinsky Reiner Böhle (until 18 Sep 2019) Sandra Bossemeyer Martin Bröker Anja Dubbert (since 27 Sep 2019) Matthias Dürbaum (since 27 Sep 2019) Ute Gerbaulet 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 300 200 100 – 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 300 200 100 72 100 100 26 26 100 100 100 72 100 100 100 100 100 100 100 100 100 100 – – 40 – 20 – 20 20 – 20 40 – 20 20 20 20 80 20 40 40 40 20 – – 40 14 20 – 1 1 – 20 30 14 20 20 20 20 80 25 40 40 40 20 2,300 2,296 480 465 – – – – – – – – – – – – 20 – – – – – – 50 – 30 100 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. 2019 – 143 – – – – – – – – – 86 20 – – – 215 – – 50 – 30 2020 2019 300 200 140 – 120 100 120 120 100 120 140 – 140 120 120 120 180 120 140 190 140 150 300 343 140 86 120 100 27 27 100 120 130 172 140 120 120 120 395 125 140 190 140 150 543 2,880 3,304 83 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Structure of Executive Board remuneration • Michael Müller (49) was appointed to the Executive Board for an initial period of three years with effect from 1 November 2020. He will become CFO as of 1 May 2021. Overview. The structure and level of the Executive Board’s remuneration are determined by the Supervisory Board and reviewed on a regular basis to determine whether they are • Zvezdana Seeger (56) also joined the Executive Board of RWE AG on 1 November 2020. appropriate and in line with generally accepted principles. The remuneration system She is the Labour Director and responsible for HR and IT. Her first tenure is also limited to described in the following was introduced with effect from 1 October 2016. It is made up of three years. non-performance-based and performance-based components. The former consists of the fixed salary, the pension instalment as well as fringe benefits. The performance- based Fixed compensation and pension instalments. The members of the Executive Board of components include the bonus and a share-based payment, the latter of which is a long-term RWE AG receive a fixed annual salary, which is paid in monthly instalments. As a second fixed component. remuneration component, they are entitled to a pension instalment for every year of service, which is determined on an individual basis. By contrast, Rolf Martin Schmitz, who At its meeting on 25 June 2020, the Supervisory Board fundamentally reformed the belonged to the Executive Board before the pension instalment was introduced, receives remuneration system, in order to align it even more closely with the objectives of the a pension commitment (see page 88). company and the demands of our stakeholders. The amendments relate to various matters, including the long-term share-based payment, personal investment in RWE shares, and the The pension instalment is paid in cash or retained in part or in full in exchange for a financial consequences of misconduct. With a few exceptions, the old rules applied to the pension commitment of equal value. The accumulated capital may be drawn on retirement, Executive Board’s remuneration in 2020. These are described in more detail in the following. but not before the Executive Board member turns 62. When retiring, Executive Board We have provided information on the major changes at the end of the chapter on page 96. members can choose a one-time payment or a maximum of nine instalments. They and their surviving dependants do not receive any further benefits. Vested retirement benefits Recipients of Executive Board remuneration. In the financial year that just ended, from earlier activities within the RWE Group remain unaffected by this. Rolf Martin Schmitz, Markus Krebber, Michael Müller and Zvezdana Seeger received compensation for their work on the Executive Board of RWE AG. Fringe benefits. Non-performance-based compensation also includes fringe benefits, primarily consisting of company cars and accident insurance premiums. • Rolf Martin Schmitz (63) has been a member of the Executive Board since 1 May 2009 and its Chairman since 15 October 2016. Concurrently, he was the Labour Director from Bonus. Executive Board members receive a bonus which is based on the economic May 2017 to October 2020. He will retire from the Executive Board as of 30 April 2021. performance of the company and the degree to which they achieve their individual goals and the collective goals of the Executive Board. The starting point for calculating the • Markus Krebber (48) was appointed to the Executive Board with effect from 1 October individual bonus is what is referred to as the ‘company bonus’, which depends on the level of 2016 and has been CFO since 15 October 2016. His tenure on the Executive Board runs EBIT of relevance to remuneration in the fiscal year in question. The basis for determining through to 30 June 2026, and he will assume chairmanship as of 1 May 2021. this figure is adjusted EBIT (EBIT minus the non-operating result). The rules of Executive Board remuneration stipulate that the Supervisory Board may modify adjusted EBIT to make this figure more suitable for measuring management performance. Such adjustments 84 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information can relate to gains on disposals, changes in provisions, as well as impairments and their The company bonus, multiplied by the individual performance factor, results in the bonus for consequences. This converts adjusted EBIT to EBIT of relevance to remuneration. each Executive Board member. This is paid in full after the end of the fiscal year. The company bonus is determined as follows: the Supervisory Board sets a target as well as Deviating from the aforementioned rules, it was agreed that the individual performance a floor and a ceiling for EBIT of relevance to remuneration at the beginning of every fiscal factor for the two months of work last year of Zvezdana Seeger and Michael Müller, who year. After the end of the fiscal year, the actual level of adjusted EBIT and EBIT of relevance joined the Executive Board as of 1 November 2020, only be determined based on the to remuneration resulting from the modifications explained earlier are determined. If the achievement of individual goals. Therefore, the collective goals in categories (2) and (3) were latter is identical to the target, the target achievement is 100 %. In this case, the company disregarded. bonus equals the contractually agreed baseline bonus. If EBIT of relevance to remuneration is exactly at the pre-defined floor, target achievement is 50 %; if it is at the ceiling, target Share-based payment. Executive Board members are granted a share-based payment, achievement is 150 %. Between the two limits, target achievement is calculated by linear which rewards the achievement of long-term goals. For fiscal 2020, this was done for the interpolation. If EBIT of relevance to remuneration is below the floor, no company bonus is last time under the 2016 – 2020 Strategic Performance Plan (SPP). The two following paid. If the ceiling is exceeded, the maximum target achievement remains 150 %. criteria are used by the SPP in measuring the degree to which goals are achieved in a fiscal In addition to the company bonus, the individual performance factor determines the level (performance), and net income of relevance to remuneration. As set out earlier, major of bonus paid to each Executive Board member. The performance factor depends on the aspects of the share-based payment have been modified. The changes were implemented achievement of: (1) individual goals, (2) general collective goals, and (3) collective goals in in the 2021 SPP, which has been in effect since the beginning of the current year. The year: the total return of the RWE share, which is made up of the share price and the dividend relation to corporate responsibility and employee motivation. The aforementioned target following commentary concerns the old SPP. categories are each weighted by one-third. After the end of every fiscal year, the Supervisory Board evaluates the individual performance of the Executive Board members The 2016 – 2020 SPP is based on performance shares with a term (vesting period) made relative to the three aforementioned categories. In so doing, it orients itself towards the up of the fiscal year to which they relate and the three subsequent years. At the beginning of degree to which the targets set at the beginning of the year have been met. Degrees of a fiscal year, Executive Board members receive a grant letter, in which they are informed of achievement can range between 0 % and 200 %. However, the derivable performance their personal gross allocation amount. The new Executive Board members Zvezdana factor is limited to between 80 % and 120 %. This means that the performance factor for an Seeger and Michael Müller received their allocation when they took office in November. Executive Board member with a 150 % target achievement is only 120 %. The number of performance shares is calculated by dividing the gross grant amount by the average closing quotation of the RWE share over the last 30 days of trading on Xetra before the respective grant year. However, the allocation is provisional. The final number of fully granted performance shares to be allocated is determined after the respective grant year. 85 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Under the 2016 – 2020 SPP, the reconciliation of the conditionally granted performance The performance shares remain unaffected after an Executive Board member resigns shares to the finally granted performance shares is oriented towards net income of from their office at the end of their contract and are paid out as planned at the end of the relevance to remuneration, which is determined by making modifications to adjusted net vesting period. If an Executive Board member leaves the company at their own request, or if income. The allowable modifications are governed by the SPP conditions and ensure that they are terminated for cause, all of the performance shares that have not reached the end actual earnings can be compared to the predetermined target figures even in cases of of the vesting period lapse. unforeseen events such as rights issues, acquisitions, disposals and changes in regulations. The Supervisory Board determines the target figures for net income of relevance to allows the Supervisory Board to penalise misconduct by an Executive Board member by remuneration at the beginning of the fiscal year on the basis of the company’s medium- shortening or completely eliminating an ongoing SPP tranche. Such misconduct includes term plan. It also establishes the ceilings and floors. Accordingly, the 2016 – 2020 SPP the intentional breach of the Code of Conduct, the compliance guidelines, a major duty set takes the following approach: if the actual and target figure are identical, 100 % of the out in the employment contract, or of the duties of care defined by Section 93 of the Malus and clawback provisions. The 2016 – 2020 SPP contains a malus clause, which conditionally granted performance shares are fully allocated. If the actual figure is exactly at German Stock Corporation Act. the floor, 50 % of the conditionally granted performance shares are fully allocated; if it is at the ceiling, the final grant amounts to 150 %. If the actual figure is below the floor, all of the The contracts of Michael Müller and Zvezdana Seeger, both of whom joined the Executive conditionally granted performance shares lapse. If the ceiling is exceeded, the maximum Board in November 2020, include the extensive malus and clawback provisions of the grant remains 150 %. future remuneration system. These provisions allow the Supervisory Board to claw back performance-linked compensation that has already been paid (bonus and share-based Pursuant to the 2016 – 2020 SPP, the performance shares are fully paid out in cash to the payment) in part or in full if the consolidated financial statements are found to contain Executive Board member three years after the final grant. This means that the payment for errors. Above and beyond that, in the event of misconduct by an Executive Board member, the 2018, 2019 and 2020 tranches is still outstanding. The level of the payment depends the Supervisory Board can exercise its discretion in reducing or cancelling any variable on the performance of the RWE share. It corresponds to the final number of performance compensation for the fiscal year with which the breach of duty is associated. If the variable shares multiplied by the sum of the average closing Xetra quotation of the RWE share on the remuneration for the fiscal year in question has already been paid, the Supervisory Board last 30 trading days of the vesting period and the dividends accumulated in the last three can demand that it be returned in part or in full. The malus and clawback provisions shall years. However, a cap applies in this case as well: even in the event of an extremely good not prejudice the obligation of the Executive Board member to compensate the company share performance, the payment is limited to a maximum of 200 % of the initial gross grant for damages. amount. The members of the Executive Board are obliged to reinvest 25 % of the payment Executive Board were paid to exercise supervisory board mandates at affiliates. This income (after taxes) in RWE shares. The shares must be held until at least the end of the third year fully counted towards the bonus (Schmitz / Krebber) or fixed remuneration (Müller / Seeger) after conclusion of the vesting period. and therefore did not increase the total remuneration. Remuneration for exercising mandates. During the past fiscal year, members of the RWE AG 86 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Range of Executive Board remuneration Payment dates. Executive Board members receive their fixed salary in monthly Ceiling: 164 % instalments. The pension instalment is paid out at the end of the year, unless it is converted Strategic Performance Plan (Maximum: 200 %) 80 % into a pension commitment. After the fiscal year, the Supervisory Board determines the target achievement for the company bonus and establishes the individual performance factor. The bonus is paid in April. For performance shares from the SPP, the payment is made in the first quarter following the end of the vesting period. As explained earlier, Executive Board members must invest 25 % of the payment in RWE shares and may not sell these shares until after three additional calendar years have passed from completion of the four-year vesting period. As a result, it takes a total of seven years for Executive Board members to obtain the full amount of their compensation. Bonus (Maximum: 180 %) 54 % Executive Board remuneration payment timeline for a fiscal year Budget: 100 % Strategic Performance Plan (100 %) Bonus (100 %) 40 % 30 % Floor: 30 % Fixed salary 30 % Fixed salary 30 % Fixed salary 30 % Remuneration broken down by component. Assuming that both the company and the Executive Board members achieved their performance targets to a degree of 100 %, the compensation structure would roughly have broken down as follows: 30 % of total remuneration would have been accounted for by the fixed salary, another 30 % by the bonus, and 40 % by long-term compensation under the 2016 – 2020 SPP. Bonus Payment in April Pension instalment Payment at year-end Limitation of Executive Board remuneration. The chart above shows the percentage Fixed salary shares of the components of Executive Board remuneration in 2020. The company bonus was limited to 150 % of the contractually agreed bonus budget and the individual performance factor was capped at 120 %. Consequently, a maximum of 180 % of the bonus budget could be reached. With regard to share-based payment under the 2016 – 2020 SPP, payout of the performance shares after the vesting period was limited to a maximum Monthly payment Strategic Performance Plan Payment in the first quarter 25 % reinvestment in RWE shares End of the minimum holding period of 200 % of the grant budget. Due to the above maximum values, there was also a cap on Fiscal year Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 total compensation, which amounted to 164 % of the budget. 87 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Pension scheme. Until the introduction of the pension instalment described earlier on In the event of a change of control, all of the performance shares granted under the 1 January 2011, pension benefits were granted to the members of the Executive Board. Of 2016 – 2020 SPP that have been finally allocated but not been paid out are paid out early. the Executive Board members in 2020, this only applies to Rolf Martin Schmitz; the pension Conversely, performance shares conditionally granted by the date of the change of control commitment made to him in 2009 remains unchanged. It entitles him to life-long lapse without replacement or consideration. retirement benefits in the event of retirement from the Executive Board of RWE AG upon turning 60, permanent disability, early termination or non-extension of his employment The latest version of the GCGC suggests that no benefits be pledged in the event of the contract by the company. In the event of death, his surviving dependants are entitled to early termination of an employment contract by an Executive Board member due to a benefits. The amount of Rolf Martin Schmitz’s qualifying income and the level of benefits change of control. We adhere to this principle in all newly concluded employment contracts. based on the years of service determine his individual pension and surviving dependants’ In the event of a change of control, Zvezdana Seeger and Michael Müller, who were benefits. appointed to the Executive Board as of 1 November 2020, do not have a special right of termination or a right to severance. The same will apply to Markus Krebber from 1 May Change of control. The contracts of Rolf Martin Schmitz and Markus Krebber contain 2021 onwards, when he succeeds Rolf Martin Schmitz as CEO. change-of-control clauses, which consist of the following main provisions: if shareholders or third parties obtain control over the company and this results in major disadvantages for Early termination of Executive Board mandate and severance cap. Following a the Executive Board members, they have a special right of termination. They can resign recommendation of the GCGC, the Executive Board’s employment contracts include a from the Executive Board and request that their employment contract be terminated in provision stipulating that if an Executive Board mandate is otherwise terminated early combination with a one-off payment within six months of the change of control. without due cause, a severance payment of no more than the remuneration due until the end of the employment contract and no more than two total annual compensations is A change of control as defined by this provision occurs when one or several shareholders or made (severance cap). third parties acting jointly account for at least 30 % of the voting rights in the company, or if any of the aforementioned can exert a controlling influence on the company in another manner. A change of control also occurs if the company is merged with another legal entity, unless the value of the other legal entity is less than 50 % of the value of RWE AG. On termination of their employment contract due to a change of control, Executive Board members receive a one-off payment equalling the compensation due until the end of the term of their contract. However, this amount will not be higher than three times their total annual remuneration, which encompasses all compensation components including fringe benefits but excluding the SPP. 88 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Level of Executive Board remuneration (according to HGB) € ‘000 Non-performance-based: Fixed remuneration2 Pension instalments3 Fringe benefits Performance-based: Bonus (short-term) of which: credited remuneration for mandates2 Value of performance shares at grant4 (long-term) Total remuneration Rolf Martin Schmitz Markus Krebber Michael Müller1 Zvezdana Seeger1 Total 2020 1,181 1,160 – 21 3,084 1,584 2019 1,183 1,160 – 23 3,032 1,782 2020 1,145 800 300 45 2,187 1,087 2019 1,085 763 300 22 2,271 1,171 85 115 40 146 1,500 4,265 1,250 4,215 1,100 3,332 1,100 3,356 2020 2019 2020 2019 156 108 43 5 297 130 – 167 453 – – – – – – – – – 154 108 43 3 297 130 – 167 451 – – – – – – – – – 2020 2,636 2,176 386 74 5,865 2,931 2019 2,268 1,923 300 45 5,303 2,953 129 261 2,934 8,501 2,350 7,571 1 Michael Müller and Zvezdana Seeger joined the Executive Board on 1 November 2020. 2 Income of Michael Müller and Zvezdana Seeger from the exercise of Supervisory Board offices within the Group counts towards fixed pay and not the bonus; in 2020, it amounted to €7,000 for Michael Müller, whereas Zvezdana Seeger did not have any such income. 3 The pension instalment paid to Markus Krebber, Michael Müller and Zvezdana Seeger is part of their 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. 4 The German Commercial Code mandates the statement of the fair value as of the grant date. Level of Executive Board remuneration foreseen when establishing the target figure. One such modification related to the dividend on the 15 % stake in E.ON, which was considered in the EBIT target because it had not been The remuneration of the Executive Board of RWE AG is calculated in compliance with the decided at the time that we would recognise it in the financial result. Moreover, a correction rules set out in the German Commercial Code (HGB). The members of the Executive Board was made to income from investments that was unexpectedly high due to timing effects. received €8,501,000 in total remuneration for their work in fiscal 2020 compared to A further adjustment related to impairments recognised in 2019, the knock-on effects of €7,571,000 in the previous year when the board was made up of two members. The which were not taken into account in the target value and were therefore eliminated. The remuneration components are shown in the table above. adjusted EBIT target derived from the medium-term plan was €1,556 million (target achievement of 100 %), with a floor of €856 million (target achievement of 50 %) and a EBIT of relevance to remuneration, the basis for calculating the bonus, amounted to ceiling of €2,256 million (target achievement of 150 %). These figures and the actual figure €1,830 million in the fiscal year that just ended. It differs from adjusted EBIT (€1,771 million) result in a target achievement of 120 % for 2020. This means that the company bonus was in that we made certain modifications to it to neutralise exceptional effects that could not be 20 % higher than the bonus budget established at the beginning of the year. 89 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Calculation of the 2020 company bonus 2020 € million Target achievement % Calculation of the 2020 individual bonus Rolf Martin Schmitz Markus Krebber Michael Müller Zvezdana Seeger Adjusted EBIT Modifications1 EBIT of relevance to remuneration Target Ceiling Floor 1 See commentary on the previous page. 1,771 59 1,830 1,556 2,256 856 – – 120 100 150 50 Bonus budget € ‘000 1,100 755 108 108 Target achievement regarding EBIT of relevance to remuneration % 120  Company bonus € ‘000 1,320 Individual performance factor  % 120 120 906 120 Individual bonus € ‘000 1,584 1,087 120 130 100 130 120 130 100 130 Rolf Martin Schmitz and Markus Krebber each had a target achievement of 132 %. Due to the cap, their individual performance factor was 120 %, whereas that of Michael Müller and The Supervisory Board found that Rolf Martin Schmitz and Markus Krebber overachieved Zvezdana Seeger was 100 %. Multiplying these figures by the company bonus results in the the individual and collective targets. The main success factors were the completion of the amount of individual bonus granted to each Executive Board member. It totalled asset swap with E.ON and the progress made in transforming RWE into a leading renewable €1,584,000 for Rolf Martin Schmitz, €1,087,000 for Markus Krebber, €130,000 for energy company. The Supervisory Board is of the opinion that the repeated strong Michael Müller and €130,000 for Zvezdana Seeger. performance of the RWE share is proof of the capital market’s endorsement of RWE’s growth strategy. Of notable mention was the Executive Board setting the stage for the accelerated expansion of wind and solar capacity through the capital increase of August 2020 and the acquisition of Nordex’s European project development business. The Calculation of the 2020 tranche of the Strategic Performance Plan 2020 € million Target achievement % conclusion of the public law contract with the German government on the conditions of the Adjusted net income lignite phaseout and its socially acceptable provisions also contributed to the high degree of Modifications1 target achievement. Goals associated with employee motivation, which is measured via regular in-company surveys, were slightly exceeded. The degrees of target achievement with respect to CR goals, which mainly relate to the carbon footprint of the generation portfolio, occupational safety as well as conformity with compliance, environmental and social standards, were between 95 % and 120 %. Messrs. Schmitz and Krebber fell 5 % short of the carbon footprint target set for the generation portfolio due to delays in the completion of renewable energy assets, which in some cases were due to COVID-19. In view of the problem-free familiarisation process of Michael Müller and Zvezdana Seeger, the Supervisory Board determined that these two new Executive Board members reached an individual target achievement of 100 %. As set out earlier, this assessment did not take account of any of the collective goals. 90 Net income of relevance to remuneration Target Ceiling Floor 1 See commentary on the next page. 1,213 –170 1,043 1,007 1,507 507 – – 104 100 150 50 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information The German Commercial Code stipulates that the long-term performance-based Net income of relevance to remuneration is adjusted net income (€1,213 million) minus remuneration component is the fair value of the performance shares granted on a several exceptional items. As mentioned on page 89, we made a downward correction to preliminary basis at the beginning of a fiscal year. As set out on pages 85 et seq., the level of the unexpectedly high income from investments and eliminated knock-on effects of the final grant depends on the development of net income of relevance to remuneration in impairments. A further modification related to the tax rate, which is used to calculate the fiscal year compared to a predefined target. The latter was set by the Supervisory Board adjusted net income. It currently amounts to 15 %, whereas the target was determined at €1,007 million for 2020 (grant of 100 %). The floor was €507 million (grant of 50 %) and based on a tax rate of 20 %. the ceiling was €1,507 million (grant of 150 %). The actual amount of €1,043 million led to a target achievement of 104 %. This means that the final grant of performance shares for 2020 was 4 % higher than the preliminary grant. Long-term incentive payment (Strategic Performance Plan): 2020 tranche Rolf Martin Schmitz Markus Krebber Michael Müller Zvezdana Seeger Grant date Fair value at grant date Share price (average) Number of performance shares allocated on a provisional basis Measurement date of performance conditions Target achievement in relation to net income of relevance to remuneration Final number of fully granted performance shares End of vesting period € ‘000 € % 1 Jan 2020 1 Jan 2020 1 Nov 2020 1 Nov 2020 1,500 26.41 56,797 1,100 26.41 41,651 167 26.41 6,311 167 26.41 6,311 31 Dec 2020 31 Dec 2020 31 Dec 2020 31 Dec 2020 104 59,069 104 43,317 104 6,563 104 6,563 31 Dec 2023 31 Dec 2023 31 Dec 2023 31 Dec 2023 91 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Long-term incentive payment (Strategic Performance Plan): 2017 – 2019 tranches Tranche Grant date Fair value at grant date Share price (average) Number of performance shares allocated on a provisional basis Rolf Martin Schmitz Markus Krebber Year 2019 2018 2017 2019 2018 2017 1 Jan 2019 1 Jan 2018 1 Jan 2017 1 Jan 2019 1 Jan 2018 1 Jan 2017 € ‘000 € 1,250 19.10 1,250 18.80 1,250 11.62 1,100 19.10 1,100 18.80 988 11.62 65,445 66,489 107,573 57,592 58,511 84,983 Measurement date of performance conditions 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2019 31 Dec 2018 31 Dec 2017 Target achievement in relation to net income of relevance to remuneration Final number of fully granted performance shares End of vesting period % 150 123 115 150 123 115 98,168 81,781 123,709 86,388 71,969 97,730 31 Dec 2022 31 Dec 2021 31 Dec 2020 31 Dec 2022 31 Dec 2021 31 Dec 2020 The table below shows the increase in provisions to cover obligations from share-based Obligations under the former pension scheme. The service cost of pension obligations to payments under the SPP. Addition to provisions for long-term share-based incentive payments € ‘000 Rolf Martin Schmitz Markus Krebber Michael Müller Zvezdana Seeger Total Rolf Martin Schmitz amounted to €595,000 in 2020 (previous year: €554,000). This is not a remuneration component in accordance with the German Commercial Code. As of year-end, the present value of the defined benefit obligation determined in accordance with 2020 2019 IFRS amounted to €16,441,000 (previous year: €14,997,000). The present value of the pension obligation determined according to the German Commercial Code totalled €13,166,000 (previous year: €11,894,000). It therefore increased by €1,272,000 2,726 (previous year: €1,360,000). Based on the emoluments qualifying for a pension as of 1,982 31 December 2020, the projected annual pension paid to Rolf Martin Schmitz on retiring – – from the company totalled €556,000, as in the previous year. This includes vested pension benefits due from former employers transferred to RWE AG. 2,527 2,096 54 54 4,731 4,708 92 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Presentation of Executive Board remuneration in accordance with the GCGC (2017) Benefits or compensation are considered granted when a binding commitment to such is made to the management board member. In deviation from German commercial law, it is immaterial to what extent the management board member has already provided the In designing and presenting the remuneration system, we also follow the recommendations services being remunerated. of the German Corporate Governance Code. Last year, we oriented ourselves towards the version of the Code dated 7 February 2017, which was in force at the time. It was replaced The term ‘benefits received’ defines the extent to which the management board member by the version of 16 December 2019, which was introduced on 20 March 2020. The new has already received payments. In this regard, the relevant aspect is the time at which the GCGC no longer contains recommendations regarding the presentation of management amount being paid is sufficiently certain and not the actual time of the payment. We also board compensation, as opposed to the old version of the Code, which recommended the take this approach in presenting the payments made under the 2016 – 2020 SPP. use of specific model tables. The Government Commission responsible for the Code is of the opinion that reporting on remuneration is now sufficiently regulated by the German law on This distinction described above can be illustrated with the example of the bonus: the the implementation of the Second Shareholder Rights Directive (ARUG II). However, the contractually agreed and promised budgeted bonus for the fiscal year in question is corresponding rules pursuant to German stock corporation law become mandatory for considered ‘granted’. Conversely, the benefits received table shows the bonus level which fiscal 2021 and later. To avoid gaps in transparency, we are presenting the Executive will actually be paid with a high degree of probability. In this regard, it is irrelevant that the Board’s remuneration for 2020 using the model tables from the 2017 GCGC once again. payment will not be made until the following year. The payment date is deemed to have The following tables show: been reached when the indicators needed to determine target achievement (and therefore the bonus) are known with sufficient certainty. It is assumed that this is already the case at the end of the year. As a result, the Executive Board bonuses are stated in the reporting year in • the benefits granted for the reporting year including fringe benefits as well as the the benefits received table. theoretical maximum and minimum amounts of variable compensation; • payments of fixed remuneration, short-term variable remuneration and long-term variable remuneration by year of receipt; and • the cost of pensions and other benefits. 93 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information Benefits granted € ‘000 Fixed remuneration Pension instalment Fringe benefits Rolf Martin Schmitz Chief Executive Officer since 15 October 2016 Markus Krebber Chief Financial Officer since 15 October 2016 Michael Müller Member of the Executive Board since 1 November 2020 Zvezdana Seeger Chief HR Officer / Labour Director since 1 November 2020 2020 (Min.) 2020 (Max.) 2020 Actual 2019 Actual 2020 (Min.) 2020 (Max.) 2020 Actual 2019 Actual 2020 (Min.) 2020 (Max.) 2020 Actual 2019 Actual 2020 (Min.) 2020 (Max.) 2020 Actual 2019 Actual 1,160 1,160 1,160 1,160 – 21 – 21 – 21 – 23 800 300 45 800 300 45 800 300 45 763 300 22 43 5 108 108 108 Total fixed remuneration 1,181 1,181 1,181 1,183 1,145 1,145 1,145 1,085 156 One-year variable remuneration (bonus) Multi-year variable remuneration (SPP) 2019 tranche (term: 2019 – 2022) 2020 tranche (term: 2020 – 2023) Total variable remuneration 0 0 – 0 0 1,980 1,100 1,1001 3,000 1,500 1,250 – – 1,250 3,000 1,500 – 4,980 2,600 2,350 0 0 – 0 0 1,359 755 7231 2,200 1,100 1,100 – – 1,100 2,200 1,100 – 3,559 1,855 1,823 0 0 – 0 0 Total variable and fixed remuneration 1,181 6,161 3,781 3,533 1,145 4,704 3,000 2,908 156 Service cost Total remuneration 595 595 595 554 – – – – – 1,776 6,756 4,376 4,087 1,145 4,704 3,000 2,908 156 684 431 43 5 156 195 333 – 333 528 684 – 43 5 156 108 167 – 167 275 431 – – – – – – – – – – – – – 108 108 108 43 3 154 0 0 – 0 0 154 – 43 3 154 195 333 – 333 528 682 – 43 3 154 108 167 – 167 275 429 – 154 682 429 – – – – – – – – – – – – 1 Figures restated due to the change in the method used to state the bonus. 94 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information 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 Payment from the 2017 tranche Total variable remuneration Total variable and fixed remuneration Service cost Total remuneration Rolf Martin Schmitz Chief Executive Officer since 15 October 2016 Markus Krebber Chief Financial Officer since 15 October 2016 Michael Müller Member of the Executive Board since 1 November 2020 Zvezdana Seeger Chief HR Officer / Labour Director since 1 November 2020 2019 763 300 22 1,085 1,171 494 494 – 1,665 2,750 – 2,750 2020 108 43 5 156 130 – – – 130 286 – 286 2019 – – – – – – – – – – – – 2020 108 43 3 154 130 – – – 130 284 – 284 2019 – – – – – – – – – – – – 2020 1,160 – 21 1,181 1,584 2,500 – 2,500 4,084 5,265 595 5,860 2019 1,160 – 23 1,183 1,782 1,538 1,538 – 3,320 4,503 554 5,057 2020 800 300 45 1,145 1,087 1,975 – 1,975 3,062 4,207 – 4,207 95 RWE Annual Report 20201 To our investors 2 Combined review of  operations Remuneration report 3 Responsibility statement 4 Consolidated financial statements 5 Further information New Executive Board remuneration system as of 2021 • A new element included in the remuneration system is the Shareholder Ownership Guidelines (SOGs) which serve to further align the interests of the Executive Board and the As set out earlier, we refined our Executive Board remuneration system in order to bring it in shareholders. The SOGs obligate the members of the Executive Board to have a minimum line with the current statutory requirements and the expectations of our stakeholders. The personal investment in RWE shares and to hold the shares during and two years after new rules have been in force since 1 January 2021. We maintained the basic structure of their tenure on the Executive Board. The personal investment quota is 100 % of annual the remuneration system. This means that Executive Board compensation still consists of gross fixed remuneration for ordinary Executive Board members and 200 % for the fixed remuneration, the pension instalment, the performance-based bonus and the Chairman. Every year, at least 25 % of variable gross remuneration paid must be invested share-based payment. A detailed presentation of the new remuneration system can be in RWE shares until the target amount is reached. found in the invitation to this year’s Annual General Meeting, to which we will submit the system for approval. The invitation has been published at www.rwe.com/agm. • Another major new feature is a clawback mechanism, which supplements the existing The following is a brief overview of some major new rules: Executive Board member may be requested to return the variable remuneration already paid. The old malus rule did not go that far: it simply allowed SPP tranches that had not demerit rule. As set out in more detail on page 86, in the event of misconduct, an • In the future, share-based payments will orientate to two additional success factors: the been paid yet to be reduced or withheld. carbon footprint of our generation portfolio and the relative total shareholder return, which puts the total return of the RWE share in relation to that of other European utility Since 2021, the employment contracts of Michael Müller and Zvezdana Seeger have stocks. These two indicators and the development of net income of relevance to reflected all the amendments to the remuneration system. This also applies to Markus remuneration will determine how many of the conditionally granted performance shares Krebber as of 1 May 2021 when he becomes CEO. It was decided not to amend the are finally granted at the end of the performance period. This period, which in the past conditions of the contract of Rolf Martin Schmitz, who will resign from the Executive Board only comprised the fiscal year in question, will be extended to three years in the new at the end of April. remuneration system. Once it ends, all three criteria will be given equal weight in calculating the final grant. Thereafter, the performance shares must be held for a further year. Therefore, the vesting period will still be four years. 96 RWE Annual Report 202003 Responsibility Statement Pumped storage power plant, Herdecke, Germany 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information 3 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, 5 March 2021 The Executive Board Schmitz Krebber Müller Seeger 98 RWE Annual Report 2020 04 Consolidated financial statements 4.1 Income statement 4.2 Statement of comprehensive income 4.3 Balance sheet 4.4 Cash flow statement 4.5 Statement of changes in equity 4.6 Notes 4.7 List of shareholdings (part of the notes) 4.8 Boards (part of the notes) 4.9 Independent auditor’s report 4.10 Information on the auditor 100 101 102 104 106 107 192 226 233 241 Nysäter onshore wind farm, Sweden 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Income statement 5 Further information 4.1 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 of which: net income / income attributable to RWE AG shareholders Basic and diluted earnings per share in € of which: from continuing operations in € of which: from discontinued operations in € 100 Note (1) (1) (1) (2) (3) (4) (5), (10) (6) (7), (12) (7) (8) (8) (9) (26) 2020 13,896 208 13,688 4,931 9,814 2,365 3,154 1,950 375 – 61 1,933 2,387 1,196 363 833 221 1,054 59 995 1.56 1.27 0.29 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 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Statement of comprehensive income 5 Further information 4.2 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 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 2020 1,054 – 493 – 46 – 143 – 682 – 417 19 – 233 – 6 – 637 – 1,319 – 265 – 282 17 20191 9,156 – 639 130 279 – 230 1,079 27 479 – 15 1,570 1,340 10,496 9,706 15 775 101 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Balance sheet 5 Further information 4.3 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 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 102 Note 31 Dec 2020 31 Dec 20191 (10) (11) (12) (13) (14) (15) (16) (17) (14) (15) (18) (19) 4,913 17,902 3,297 4,244 131 3,435 142 397 4,777 19,016 3,281 4,337 128 3,276 264 689 34,461 35,768 1,632 2,482 3,007 9,820 228 4,219 4,774 1,045 27,207 61,668 1,585 2,359 3,621 12,756 196 3,258 3,192 1,274 28,241 64,009 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Balance sheet 5 Further information Equity and liabilities € million Equity RWE AG shareholders’ 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 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 103 Note 31 Dec 2020 31 Dec 20191 (20) (22) (23) (24) (25) (16) (22) (23) (24) (25) 17,182 789 17,971 16,964 503 17,467 19,470 18,937 3,951 797 1,154 1,908 3,924 1,050 862 2,164 27,280 26,937 3,004 1,247 2,387 237 9,003 539 16,417 61,668 2,638 1,689 2,987 193 11,588 510 19,605 64,009 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Cash flow statement 5 Further information 4.4 Cash flow statement € million Income from continuing operations 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 Changes in marketable securities and cash investments 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) 104 Note (30) 2020 833 3,179 342 485 – 54 – 647 – 13 4,125 50 4,175 – 2,285 132 – 1,073 233 – 1,189 – 4,182 – 96 – 4,278 – 76 – 4,354 2019 – 660 2,754 2,825 44 – 77 – 3,077 – 2,786 – 977 – 546 – 1,523 – 1,767 72 – 4 623 1,592 516 – 42 474 – 1,203 – 729 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Cash flow statement 5 Further information € million 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 Note (30) 2020 2,230 – 522 5,537 – 5,476 1,769 6 1,775 1,596 – 34 1,562 3,212 20 3,192 4,774 4,774 2019 – 60 – 869 – 560 15,876 – 14,198 189 35 224 – 2,028 15 – 2,013 5,225 1,702 3,523 3,212 20 3,192 105 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Statement of changes in equity 5 Further information 4.5 Statement of changes in equity Statement of changes in equity € million Note (20) Subscribed capital of RWE AG Addi tional paid-in capital of RWE AG Retained earnings and distributable profit Accumulated other comprehensive Income Currency trans lation adjust ments Fair value measurement of financial instruments Used for hedging purposes Debt instruments measured at fair value through other comprehensive income RWE AG share- holders’ interest RWE AG hybrid capital investors’ interest Non- controlling interests Total Balance at 1 Jan 2019 1,574 2,385 1,139 285 17 3,336 8,736 Capital paid out / paid in Dividends paid Income Other comprehensive income Total comprehensive income Other changes Balance at 1 Jan 20201 Capital paid in Dividends paid Income Other comprehensive income Total comprehensive income Other changes 1,574 157 2,385 1,844 Balance at 31 Dec 2020 1,731 4,229 – 430 8,498 – 125 8,373 – 174 8,908 – 11 – 492 995 – 682 313 – 123 8,595 812 812 1,097 – 392 – 392 705 – 430 8,498 1,208 9,706 – 1,048 16,964 1,990 – 492 995 – 1,277 – 282 – 998 493 493 – 874 2,955 – 222 – 222 – 875 1,858 17,182 28 28 45 19 19 64 940 – 869 – 61 15 15 – 25 4,581 14,257 6 – 460 643 132 775 – 4,399 503 162 – 64 59 – 42 17 171 789 – 863 – 951 9,156 1,340 10,496 – 5,472 17,467 2,152 – 556 1,054 – 1,319 – 265 – 827 17,971 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 106 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 4.6 Notes Basis of presentation We employ internal control systems, uniform groupwide directives, and programmes for basic and advanced staff training to ensure that the consolidated financial statements and combined review of RWE AG, headquartered at RWE Platz 1 in 45141 Essen, Germany, is the parent company of the operations are adequately prepared. Compliance with legal regulations and the internal guidelines as RWE Group (‘RWE’ or ‘Group’). RWE generates electricity from renewable and conventional sources, well as the reliability and viability of the control systems are continuously monitored throughout the primarily in Europe and the USA. Group. The consolidated financial statements for the period ended 31 December 2020 were approved for In line with the requirements of the German Corporate Control and Transparency Act (KonTraG), the publication on 5 March 2021 by the Executive Board of RWE AG. The statements were prepared in Group’s risk management system enables the Executive Board to identify risks at an early stage and accordance with the International Financial Reporting Standards (IFRSs) applicable in the European take countermeasures, if necessary. Union (EU), as well as in accordance with the supplementary accounting regulations applicable pursuant to Sec. 315e, Para. 1 of the German Commercial Code (HGB). The previous year’s figures were The consolidated financial statements, the combined review of operations, and the independent calculated according to the same principles. auditors’ report are discussed in detail by the Audit Committee and at the Supervisory Board’s meeting on financial statements with the independent auditors present. The results of the Supervisory Board’s A statement of changes in equity has been disclosed in addition to the income statement, the statement examination are presented in the report of the Supervisory Board on page 11 et seqq. of comprehensive income, the balance sheet and the cash flow statement. The Notes also include segment reporting. Several balance sheet and income statement items have been combined in the interests of clarity. Scope of consolidation These items are stated and explained separately in the Notes to the financial statements. The income In addition to RWE AG, the consolidated financial statements contain all material German and foreign statement is structured according to the nature of expense method. companies which RWE AG controls directly or indirectly. In determining whether there is control, in addi- tion to voting rights, other rights in the company contracts or articles of incorporation and potential The consolidated financial statements have been prepared in euros. Unless specified otherwise, all voting rights are also taken into consideration. amounts are stated in millions of euros (€ million). Due to calculation procedures, rounding differences may occur. Material associates are accounted for using the equity method, and principal joint arrangements are These consolidated financial statements were prepared for the fiscal year from 1 January to 31 December 2020. accounted for using the equity method or as joint operations. Associates are companies on which RWE AG exercises a significant influence on the basis of voting rights between 20 % and 50 % or on the basis of contractual agreements. In classifying joint arrange- The Executive Board of RWE AG is responsible for the preparation, completeness and accuracy of the ments which are structured as independent vehicles, as joint operations or as joint ventures, other facts consolidated financial statements and the Group review of operations, which is combined with the and circumstances – in particular delivery relationships between the independent vehicle and the parties review of operations of RWE AG. participating in such – are taken into consideration, in addition to the legal form and contractual agreements. 107 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Investments in subsidiaries, joint ventures, joint operations or associates which are of secondary First-time consolidation and deconsolidation generally take place when control is obtained or lost. importance from a Group perspective are accounted for in accordance with IFRS 9. The list of Group shareholdings pursuant to Sec. 313, Para. 2 of the German Commercial Code (HGB) is to €13 million, which were reported in other operating income (previous year: €18 million). Furthermore, a Sales of shares which led to a change of control resulted in sales proceeds from disposals amounting presented on page 192 et seqq. The following summary shows the changes in the number of fully consolidated companies that occurred during the reporting period: Number of fully consolidated companies Germany Abroad 1 Jan 2020 First-time consolidation Deconsolidation Mergers 31 Dec 2020 58 4 -3 -4 55 201 16 -9 -11 197 Total 259 20 -12 -15 252 deconsolidation gain of €154 million on the sale of discontinued operations (previous year: €8,258 million) was recognised in the ‘income from discontinued operations’ line item on the income statement. Within the framework of purchases and sales of subsidiaries and other business units which resulted in a change of control, purchase prices amounted to €270 million (previous year: €3,592 million) and sales prices amounted to €872 million (previous year: €14,296 million). Sales prices received from third parties were paid exclusively in cash (previous year: using equity interests and offsetting against other payments within the scope of the transaction agreed with E.ON). During the reporting period, purchase prices were paid to third parties exclusively in cash (previous year: offsetting against other payments within the scope of the transaction agreed with E.ON, with the exception of €25 million which was paid in cash and cash equivalents). In relation to this, cash and cash equivalents (excluding assets held for sale) were acquired in the amount of €0 million (previous year: €113 million) and were disposed of in the amount of €5 million (previous year: €1,250 million). Unchanged versus 31 December 2019, there were 31 investments and joint ventures accounted for using the equity method, of which eleven were in Germany and 20 were abroad. Acquisitions Acquired E.ON operations As in the previous year, two companies are presented as joint operations. Of these, Greater Gabbard As part of the extensive asset swap agreed upon with E.ON SE on 12 March 2018, RWE gained control Offshore Winds Limited, UK, is a material joint operation of the RWE Group. Greater Gabbard holds a of major parts of E.ON’s former renewable energy business on 18 September 2019. The acquired 500 MW offshore wind farm, which RWE Renewables UK Swindon Limited operates together with operations are active in onshore and offshore wind as well as in the photovoltaic business in Europe and Scottish and Southern Energy (SSE) Renewables Holdings. RWE Renewables UK Swindon Limited the USA. owns 50 % of the shares and receives 50 % of the power generated (including green power certificates). The wind farm is part of the segment Offshore Wind. 108 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The status at initial consolidation is presented in the following table as at 31 December 2019: King’s Lynn power station 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 IFRS carrying amounts (fair value) at initial consolidation (as at 31 Dec 2019) 10,292 The acquisition of a 100 % stake in Centrica KL Limited (CKLL), Windsor, UK, was completed on 12 February 2020, as agreed with the British energy company GB Gas Holdings Limited, a subsidiary of Centrica plc, Windsor, UK, at the end of December 2019. The power station is a combined-cycle gas turbine (CCGT) power plant located in King’s Lynn, Norfolk, UK. The plant has a capacity of 382 MW and will receive reliable, stable capacity payments in the British capacity market until 2035 based on a 15-year contract with a term starting in October 2020. 1,951 6,332 2,009 1,886 3,979 613 2,447 919 5,260 2,939 3,592 653 Initial accounting of the business combination is presented in the following table, together with the assumed assets and liabilities: Balance-sheet items € million Non-current assets Current assets Non-current liabilities Current liabilities Net assets Purchase price Goodwill IFRS carrying amounts (fair value) at initial consolidation 125 5 9 88 33 33 An update of the figures reported upon first-time consolidation was performed during the period under review and resulted in the following adjustments: Due to better understanding of the fair value of operating rights and property, plant and equipment in particular, the fair value of net assets stated upon Since its initial consolidation, the company has contributed €25 million to the Group’s revenue and first-time consolidation was reduced by €261 million, from €2,939 million to €2,678 million. Taking €12 million to the Group’s earnings. account of a purchase price adjustment resulting from contractually agreed settlements, the goodwill recognised upon first-time consolidation increased by €141 million to €794 million. 109 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Excluding €80 million in redeemed shareholder loans, the purchase price amounted to €33 million and The acquired operations have not yet made any significant contributions to the Group’s revenue and was paid exclusively in cash and cash equivalents. earnings since they were consolidated for the first time. Nordex wind and solar projects The purchase price amounted to €375 million (excluding repaid shareholder loans in the amount of In early November 2020, RWE completed the acquisition of 100 % of the shares in the companies NXD €21 million) and was paid exclusively in cash and cash equivalents. HOLDCO B.V. and NXD France SAS and thus gained control of the European development operations of the wind turbine manufacturer Nordex. Since then, the names of the acquired companies have been Goodwill is primarily based on expected future use and synergy effects. changed to RWE Renewables HoldCo B.V. and RWE Renouvelables SAS. The initial accounting of the business combination has not been finalised due to the complex structure These operations encompass a pipeline of onshore wind and solar projects with a total generation of the transaction. capacity of 2.7 GW, of which 1.9 GW is located in France. The pipeline also includes ventures in Spain, Sweden and Poland. Some 15 % of the pipeline will soon be ready for a final investment decision or is at an advanced stage of development. State subsidies have already been secured for generation capacity of 230 MW. The assets and liabilities acquired within the scope of the transaction are presented in the following table: Balance-sheet items € million Non-current assets Current assets Non-current liabilities Current liabilities Net assets Purchase price Goodwill IFRS carrying amounts (fair value) at initial consolidation 329 0 56 6 267 375 108 110 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Disposals, disposal groups and discontinued operations Key figures of discontinued operations 31 Dec 2019 Východoslovenská energetika Holding a.s. (VSEH) On 21 August 2020, RWE sold the shares in its fully consolidated investment in the Slovak power and gas utility Východoslovenská energetika Holding a.s. (VSEH), which was previously stated as part of ‘innogy – discontinued operations’, to E.ON. The deconsolidation gain amounted to €154 million and is stated in the ‘income from discontinued operations’ line item on the income statement. € million Non-current assets Intangible assets Property, plant and equipment Other non-current assets The elimination bookings within the scope of the consolidation of expenses and income for the intragroup deliveries and services existing so far, which will be continuing either with such or with third parties after the deconsolidation of the discontinued operations, were fully assigned to such operations. Current assets Major key figures of the activities of the discontinued operations deconsolidated as of 21 August 2020 are presented in the following tables: Non-current liabilities Provisions Financial liabilities Other non-current liabilities Current liabilities 111 405 734 8 1,147 127 9 225 131 365 145 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Key figures of discontinued operations 2020 2019 The Stella wind farm (201 MW) commenced operation in December 2018, with Cranell (220 MW) and € million Revenue1 Other income2 Expenses3 Income of discontinued operations before tax Taxes on income Deconsolidation gain Income of discontinued operations 507 15 437 85 18 154 221 23,890 1,518 23,214 2,194 636 8,258 9,816 East Raymond (200 MW) following suit in September 2020 and January 2021, respectively. West Raymond (240 MW) was still under construction when these Notes were prepared. It is scheduled to go online in the second quarter of 2021 and then be sold off. The sale of a 75 % stake in the three onshore wind farms Stella, Cranell and East Raymond was completed in January 2021 (see ‘Events after the balance sheet date’, page 190). As of 31 December 2020, the assets and liabilities of the four wind farms were reported as ‘held for sale’ in the balance sheet. The main groups of assets and liabilities of the disposal group are presented below: Key figures of the disposal group 31 Dec 2020 1 Including income with continuing operations in the amount of €1,402 million in the previous year. 2 Including income with continuing operations in the amount of €108 million in the previous year. 3 Including expenses with continuing operations in the amount of €119 million (previous year: €9,772 million). € million Non-current assets Property, plant and equipment Other non-current assets In the previous year, RWE sold the parts of innogy stated as ‘innogy – discontinued operations’ since 30 June 2018 to E.ON SE. This primarily involved most of the grid and retail business. The deconsolidation gain on this transaction amounted to €8,258 million in the previous year, which was recognised in the ‘income from discontinued operations’ line item on the income statement. Current assets Of the share of total comprehensive income attributable to RWE AG shareholders, –€469 million Non-current liabilities (previous year: €237 million) were allocable to continuing operations and €187 million (previous year: €9,469 million) were allocable to discontinued operations. Provisions Financial liabilities Sale of a 75 % stake in the onshore wind farms Stella, Cranell, and East and West Raymond Other non-current liabilities In December 2020, RWE concluded contracts with Algonquin Power Fund (America) Inc., USA, a subsidiary of Algonquin Power & Utilities Corp., Canada, and Greencoat Capital, UK, on the sale of a total of 75 % of the shares in the four onshore wind farms Stella, Cranell, and East and West Raymond in the US state of Texas. These assets are part of the segment Onshore Wind / Solar. Upon completion of the Current liabilities individual transactions, RWE will deconsolidate the wind farms and report its remaining 25 % stake as an investment accounted for using the equity method. The disposal group’s accumulated other comprehensive income amounted to €18 million. 112 971 4 975 70 43 277 105 425 114 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Georgia Biomass In the event of deconsolidation, the related goodwill is derecognised with an effect on income. Changes On 31 July 2020, the sale of Georgia Biomass, which had been contractually agreed on 18 June 2020, in the ownership share which do not alter the ability to control the subsidiary are recognised without an was completed. Georgia Biomass was responsible for RWE’s biomass business in the USA and was part effect on income. By contrast, if there is a change in control, the remaining shares are revalued with an of the segment Hydro / Biomass / Gas. The deconsolidation gain on this transaction amounted to effect on income. €13 million, which will be recognised in the ‘other operating income’ line item on the income statement. Seabreeze II installation ship eliminated; intra-group profits and losses are eliminated. In April 2020, the Seabreeze II offshore installation ship and the related equipment was sold and transferred to SPIC Ronghe International Financial Leasing Co. Ltd. The ship was part of the Offshore For investments accounted for using the equity method, goodwill is not reported separately, but rather Wind segment. This transaction resulted in a gain in the medium double-digit million euro range, included in the value recognised for the investment. In other respects, the consolidation principles which is recognised in the ‘other operating income’ line item on the income statement. described above apply analogously. If impairment losses on the equity value become necessary, we Expenses and income as well as receivables and payables between consolidated companies are Consolidation principles report such under income from investments accounted for using the equity method. The financial statements of investments accounted for using the equity method are also prepared using the Group’s uniform accounting policies. The financial statements of German and foreign companies included in the scope of the Group’s financial statements are prepared using uniform accounting policies. On principle, subsidiaries whose fiscal years do not end on the Group’s balance-sheet date (31 December) prepare interim financial Foreign currency translation statements as of this date. Three subsidiaries have a different balance-sheet date of 31 March (previous In their individual financial statements, the companies measure non-monetary foreign currency items year: three). Different fiscal years compared to the calendar year stem from tax-related reasons or at the balance-sheet date using the exchange rate in effect on the date they were initially recognised. country-specific regulations. Monetary items are converted using the exchange rate valid on the balance-sheet date. Exchange rate gains and losses from the measurement of monetary balance-sheet items in foreign currency occurring Business combinations are reported according to the acquisition method. This means that capital up to the balance-sheet date are recognised on the income statement. consolidation takes place by offsetting the purchase price, including the amount of the non- controlling interests, against the acquired subsidiary’s revalued net assets at the time of acquisition. In doing so, Functional foreign currency translation is applied when converting the financial statements of compa- the non-controlling interests can either be measured at the prorated value of the subsidiary’s identifia- nies outside of the Eurozone. As the principal foreign enterprises included in the consolidated financial ble net assets or at fair value. The subsidiary’s identifiable assets, liabilities and contingent liabilities are statements conduct their business activities independently in their national currencies, their bal- measured at full fair value, regardless of the amount of the non-controlling interests. Intangible assets ance-sheet items are translated into euros in the consolidated financial statements using the average are reported separately from goodwill if they are separable from the company or if they stem from a exchange rate prevailing on the balance-sheet date. This also applies for goodwill, which is viewed as an contractual or other right. In accordance with IFRS 3, no new restructuring provisions are recognised asset of the economically autonomous foreign entity. We report differences to previous-year translations within the scope of the purchase price allocation. If the purchase price exceeds the revalued prorated in other comprehensive income without an effect on income. Expense and income items are translated net assets of the acquired subsidiary, the difference is capitalised as goodwill. If the purchase price is using annual average exchange rates. When translating the adjusted equity of foreign companies lower, the difference is included in income. accounted for using the equity method, we follow the same procedure. 113 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The following exchange rates (among others) were used as a basis for foreign currency translations: period during which the products are expected to be sold. Research expenditures are recognised as expenses in the period in which they are incurred. 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 An impairment loss is recognised for an intangible asset if the recoverable amount of the asset is less 2020 2019 31 Dec 2020 31 Dec 2019 0.87 1.12 3.77 0.22 0.13 0.10 0.09 0.89 1.14 3.90 0.23 0.13 0.09 0.10 0.81 1.11 3.81 0.22 0.13 0.10 0.10 0.89 1.18 3.94 0.23 0.13 0.10 0.10 than its carrying amount. A special regulation applies for cases when the asset is part of a cash-generating 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. If the intangible asset is a part of a cash-generating unit, the impairment loss is calculated based on the recoverable amount of this unit. If goodwill was allocated to a cash-generating unit and the carrying amount of the unit exceeds the recoverable amount, the allocated goodwill is initially written down by the difference. Impairment losses which must be recognised in addition to this are taken into account by reducing the carrying amount of the other assets of the cash-generating unit on a prorated basis. If the reason for an impairment loss recognised in prior periods has ceased to exist, a write-back to intangible assets is performed. The increased carrying amount resulting from the write-back may not, however, exceed the amortised cost. Impairment losses on goodwill are not reversed. Accounting policies Property, plant and equipment is stated at depreciated cost. Borrowing costs are capitalised as part of the asset’s cost, if they are incurred directly in connection with the acquisition or production of a ‘qualified asset’. What characterises a qualified asset is that a considerable period of time is required Intangible assets are accounted for at amortised cost. With the exception of goodwill, all intangible to prepare it for use or sale. If necessary, the cost of property, plant and equipment may contain the assets have finite useful lives and are amortised using the straight-line method. Useful lives and estimated expenses for the decommissioning of plants or site restoration. Maintenance and repair costs methods of amortisation are reviewed on an annual basis. are recognised as expenses. Software for commercial and technical applications is amortised over three to five years. ‘Operating With the exception of land and leasehold rights, as a rule, property, plant and equipment is depreciated rights’ refer to the entirety of the permits and approvals required for the operation of a power plant. Such using the straight-line method, unless in exceptional cases another depreciation method is better suited rights are generally amortised over the economic life of the power plant, using the straight-line method. to the usage pattern. The depreciation methods are reviewed annually. We calculate the depreciation of Capitalised customer relations are amortised over a maximum period of up to ten years. RWE’s typical property, plant and equipment according to the following useful lives, which apply throughout the Group and are also reviewed annually: Goodwill is not amortised; instead it is subjected to an impairment test once every year, or more frequently if there are indications of impairment. Development costs are capitalised if a newly developed product or process can be clearly defined, is technically feasible and it is the company’s intention to either use the product or process itself or market it. Furthermore, asset recognition requires that there be a sufficient level of certainty that the development costs lead to future cash inflows. Capitalised development costs are amortised over the 114 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 7 – 50 6 – 40 Up to 25 10 – 60 3 – 25 44 – 52 5 – 50 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 insofar as such can be determined reliably. Other investments are also recognised at fair value, insofar as such can be determined reliably. The option to state changes in fair value in other comprehen- sive income is exercised for some of these equity instruments. Non-current securities are also accounted for at fair value and changes in value are recognised through profit or loss or other comprehensive income depending on their classification. 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 losses is recognised through profit or loss for debt instruments that are recognised at fair value through other comprehensive income. The changes reported in other comprehensive income are recognised with an effect on earnings upon the sale of these instruments. Property, plant and equipment also include right-of-use assets resulting from leases of which RWE is the Receivables are comprised of financial receivables, trade accounts receivable and other receivables. lessee. These right-of-use assets are measured at cost. The cost results from the present value of the Aside from financial derivatives, receivables and other assets are stated at amortised cost minus a lease instalments, adjusted to take into account advance payments, initial direct costs and potential risk provision in the amount of the expected losses. dismantling obligations and corrected for received lease incentives. Right-of-use assets are depreciated using the straight-line method over the lease term or the expected useful life, whichever is shorter. Loans reported under financial receivables are stated at amortised cost minus a risk provision in the amount of the expected losses. Loans with interest rates common in the market are shown on the For short-term leases and leases for low-value assets, lease instalments are recognised as an expense balance sheet at nominal value; as a rule, however, non-interest or low-interest loans are disclosed at over the lease term. For operating leases of which RWE is the lessor, the minimum lease instalments are their present value discounted using an interest rate commensurate with the risks involved. recognised as income over the lease term. Impairment losses and write-backs on property, plant and equipment are recognised according to the principles described for intangible assets. CO2 emission allowances and certificates for renewable energies are accounted for as intangible assets and reported under other assets; both are stated at cost and are not amortised. Deferred taxes result from temporary differences in the carrying amount in the separate IFRS financial Investments accounted for using the equity method are initially accounted for at cost and thereafter statements and tax bases, and from consolidation procedures. Deferred tax assets also include tax based on the carrying amount of their prorated net assets. The carrying amounts are increased or reduction claims resulting from the expected utilisation of existing loss carryforwards in subsequent reduced annually by prorated profits or losses, dividends and all other changes in equity. Goodwill is not years. Deferred taxes are capitalised if it is sufficiently certain that the related economic advantages can reported separately, but rather included in the recognised value of the investment. Goodwill is not be used. Their amount is assessed with regard to the tax rates applicable or expected to be applicable in amortised. An impairment loss is recognised for investments accounted for using the equity method, if the specific country at the time of realisation. The tax regulations valid or adopted as of the balance- the recoverable amount is less than the carrying amount. sheet date are key considerations in this regard. Deferred tax assets and deferred tax liabilities are netted out for each company and / or tax group. 115 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Inventories are assets which are held for sale in the ordinary course of business (finished goods and which occurs on their settlement date. Unrealised gains and losses are recognised through profit or loss goods for resale), which are in the process of production (work in progress – goods and services) or which or other comprehensive income, with due consideration of any deferred taxes depending on the are consumed in the production process or in the rendering of services (raw materials including nuclear underlying valuation category. An impairment in the amount of the expected credit losses is recognised fuel assemblies and excavated earth for lignite mining). through profit or loss for debt instruments that are stated at fair value through other comprehensive income. Changes included in other comprehensive income are recognised through profit or loss on Insofar as inventories are not acquired primarily for the purpose of realising a profit on a short-term disposal of such instruments. resale transaction, they are carried at the lower of cost or net realisable value. Production costs reflect the full costs directly related to production; they are determined based on normal capacity utilisation Cash and cash equivalents consist of cash on hand, demand deposits and current fixed-interest and, in addition to directly allocable costs, they also include adequate portions of required materials securities with a maturity of three months or less from the date of acquisition. and production overheads. They also include production- related depreciation. Borrowing costs, however, are not capitalised as part of the cost. The determination of cost is generally based on average Assets are stated under Assets held for sale if they can be sold in their present condition and their sale values. The usage of excavated earth for lignite mining is calculated using the ‘first in – first out’ method is highly probable within the next twelve months. Such assets may be certain non-current assets, asset (FIFO). groups (‘disposal groups’) or operations (‘discontinued operations’). Liabilities intended to be sold in a transaction together with assets are a part of a disposal group or discontinued operations, and are If the net realisable value of inventories written down in earlier periods has increased, the reversal of reported separately under Liabilities held for sale. the write-down is recognised as a reduction of the cost of materials. Nuclear fuel assemblies are stated at depreciated cost. Depreciation is determined by operation and value less costs to sell, as long as this amount is lower than the carrying amount. capacity, based on consumption and the reactor’s useful life. Inventories which are acquired primarily for the purpose of realising a profit on a short-term resale income from continuing operations until final completion of the sale. Gains or losses on the valuation of transaction are recognised at fair value less costs to sell. Changes in value are recognised with an discontinued operations and on certain assets of a discontinued operation, which are not subject to effect on income. the valuation rules pursuant to IFRS 5, are stated under income from discontinued operations. Gains or losses on the valuation of specific assets held for sale and of disposal groups are stated under Non-current assets held for sale are no longer depreciated or amortised. They are recognised at fair Securities classified as current marketable securities essentially consist of marketable securities held The stock option plans are accounted for as cash-settled share-based payment. At the balance-sheet in special funds as well as fixed-interest securities which have a maturity of more than three months and date, a provision is recognised in the amount of the prorated fair value of the payment obligation. less than one year from the date of acquisition. Securities held in special funds are measured at fair value Changes in the fair value are recognised with an effect on income. The fair value of options is determined through profit or loss or at fair value through other comprehensive income. The transaction costs using generally accepted valuation methodologies. directly associated with the acquisition of these securities are included in the initial measurement, 116 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Provisions are recognised for all legal or constructive obligations to third parties which exist on the tafeln 2018 G’ by Klaus Heubeck, and the Standard SAPS Table S2PA of the respective year for the balance-sheet date and stem from past events which will probably lead to an outflow of resources, and the United Kingdom, taking into consideration future changes in mortality rates). The provision derives from amount of which can be reliably estimated. Provisions are carried at their prospective settlement amount the balance of the actuarial present value of the obligations and the fair value of the plan assets. The and are not offset against reimbursement claims. If a provision involves a large number of items, the service cost is disclosed in staff costs. Net interest is included in the financial result. obligation is estimated by weighting all possible outcomes by their probability of occurrence (expected value method). Gains and losses on the revaluation of net defined benefit liability or asset are fully recognised in the fiscal year in which they occur. They are reported outside of profit or loss, as a component of other All non-current provisions are recognised at their prospective settlement amount, which is discounted as comprehensive income in the statement of comprehensive income, and are immediately assigned to of the balance-sheet date. In the determination of the settlement amount, any cost increases likely to retained earnings. They remain outside profit or loss in subsequent periods as well. occur up until the time of settlement are taken into account. If necessary, the cost of property, plant and equipment may contain the estimated expenses for the utes to the plan. Contributions to the plan are reported under staff costs. decommissioning of plants or site restoration. Decommissioning, restoration and similar provisions are recognised for these expenses. If changes in the discount rate or changes in the estimated timing or Waste management provisions in the nuclear energy sector are based on obligations under public law, amount of the payments result in changes in the provisions, the carrying amount of the respective asset in particular the German Atomic Energy Act, and on restrictions from operating licenses. These is increased or decreased by the corresponding amount. If the decrease in the provision exceeds the provisions are measured using estimates, which are based on and defined in contracts as well as on carrying amount, the excess is recognised immediately through profit or loss. information from internal and external specialists (e.g. experts). In the case of defined contribution plans, the enterprise’s obligation is limited to the amount it contrib- As a rule, releases of provisions are credited to the expense account on which the provision was Obligations existing as of the balance-sheet date and identifiable when the balance sheet is being originally recognised. prepared are recognised as provisions for mining damage to cover land recultivation and remediation of mining damage that has already occurred or been caused. The provisions must be recognised due to Provisions for pensions and similar obligations are recognised for defined benefit plans. These are obligations under public law, such as the German Federal Mining Act, and formulated, above all, in obligations of the company to pay future and ongoing post-employment benefits to entitled current operating schedules and water law permits. Provisions are generally fully related to the degree of mining and former employees and their surviving dependents. In particular, the obligations refer to retirement in question. Such provisions are measured at full expected cost or according to estimated compensation pensions. Individual commitments are generally oriented to the employees’ length of service and payments. Cost estimates are based on external expert opinions to a significant extent. compensation. 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 account the pension benefits and benefit entitlements known as of the balance-sheet date, but also A provision is recognised to cover the obligation to submit CO2 emission allowances and certificates for renewable energies to the 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 obliga- tion is not covered with allowances that are available or have been purchased forward, the provision for anticipated future increases in salaries and pension benefits. The calculation is based on actuarial this portion is measured using the market price of the emission allowances or certificates for renewable reports, taking into account appropriate biometric parameters (for Germany, in particular the ‘Richt- energies on the reporting date. 117 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Liabilities consist of financial liabilities, trade accounts payable, income tax liabilities and other hedge exists, unrealised gains and losses from the hedging instrument are initially stated as other liabilities. Upon initial recognition, these are generally stated at fair value including transaction costs comprehensive income. Such gains or losses are only included on the income statement when the and are carried at amortised cost in the periods thereafter (except for derivative financial instruments). hedged underlying transaction has an effect on income. If forecast transactions are hedged and such Lease liabilities are measured at the present value of the future lease payments. For subsequent transactions lead to the recognition of a financial asset or financial liability in subsequent periods, the measurements, the lease payments are divided into the financing costs and repayment portion of the amounts that were recognised in equity until this point in time are recognised on the income statement outstanding debt. Financing costs are distributed over the lease term in such a manner that a steady in the period during which the asset or liability affects the income statement. If the transactions result in interest rate is created for the outstanding debt. the recognition of non-financial assets or liabilities, for example the acquisition of property, plant and equipment, the amounts recognised in equity without an effect on income are included in the initial If uncertain income tax items are recognised in income tax liabilities because they are probable, the cost of the asset or liability. former are generally measured at the most likely amount. Measurement at expected value is only considered in exceptional cases. The purpose of hedges of a net investment in foreign operations (net investment hedges) is to hedge the currency risk from investments with foreign functional currencies. Unrealised gains and losses from Moreover, other liabilities also include contract liabilities. A contract liability is the obligation of the such hedges are recognised in other comprehensive income until disposal of the foreign operation. Group to transfer goods or services to a customer, for which we have already received consideration or for which the consideration is already due. Hedging relationships must be documented in detail and meet the following effectiveness requirements: Derivative financial instruments are recognised as assets or liabilities and measured at fair value, • there is an economic relationship between the hedged item and the hedging instrument, regardless of their purpose. Changes in this value are recognised with an effect on income, unless the • the value change of hedging relationship is not dominated by the credit risk, and instruments are used for hedge accounting purposes. In such cases, recognition of changes in the fair • the hedge ratio is the same as that resulting from the quantities used within the scope of risk value depends on the type of hedging transaction. management. Fair value hedges are used to hedge assets or liabilities carried on the balance sheet against the risk of Only the effective portion of a hedge is recognised in accordance with the preceding rules. The a change in their fair value. The following applies: changes in the fair value of the hedging instrument ineffective portion is recognised immediately on the income statement with an effect on income. and the fair value of the respective underlying transactions are recognised in the same line item on the income statement. Hedges of unrecognised firm commitments are also recognised as fair value hedges. Contracts on the receipt or delivery of non-financial items in accordance with the company’s expected Changes in the fair value of the firm commitments with regard to the hedged risk result in the recogni- purchase, sale or usage requirements (own-use contracts) are not accounted for as derivative financial tion of an asset or liability with an effect on income. instruments, but rather as executory contracts. If the contracts contain embedded derivatives, the Cash flow hedges are used to hedge the risk of variability in future cash flows related to an asset or and risks of the embedded derivatives are not closely related to the economic characteristics and risks liability carried on the balance sheet or related to a highly probable forecast transaction. If a cash flow of the host contract. Written options to buy or sell a non-financial item which can be settled in cash are derivatives are accounted separately from the host contract, insofar as the economic characteristics not own-use contracts. 118 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Contingent liabilities are possible obligations to third parties or existing obligations which will probably The rules governing valuation allowances for financial assets under IFRS 9 stipulate that the expected not lead to an outflow of economic benefits or the amount of which cannot be measured reliably. credit losses must be determined. The valuation allowance is based on information from within and Contingent liabilities are only recognised on the balance sheet if they were assumed within the framework outside the Group. of a business combination. The amounts disclosed in the Notes correspond to the exposure at the balance-sheet date. The impairment test for goodwill and non-current assets is based on certain assumptions pertaining to the future, which are regularly adjusted. Property, plant and equipment is tested for indications of Management judgements in the application of accounting policies. Management judgements are impairment on each cut-off date. Based on the business models, the anticipated effect of the COVID-19 required in the application of accounting policies. In particular, this pertains to the following aspects: pandemic did not necessitate the performance of impairment tests. • With regard to certain contracts, a decision must be made as to whether they are to be treated as Power plants are grouped together as a cash-generating unit if their production capacity and fuel needs derivatives or as so-called own-use contracts, and be accounted for as executory contracts. are centrally managed as part of a portfolio, and it is not possible to ascribe individual contracts and • Financial assets are classified by contractual cash flows and applied business model. Whereas the cash flows to the specific power plants. contractual cash flows are determined by the characteristics of the financial instruments, the business model is based on the Group’s internal requirements relating to the portfolios of financial Upon first-time consolidation of an acquired company, the identifiable assets, liabilities and contingent instruments. liabilities are recognised at fair value. Determination of the fair value is based on valuation methods • With regard to assets held for sale, it must be determined if they can be sold in their current condition which require a projection of anticipated future cash flows. and if the sale of such is highly probable in the next twelve months. If both conditions apply, the assets and any related liabilities must be reported and measured as assets or liabilities held for sale, respectively. Deferred tax assets are recognised if realisation of future tax benefits is probable. Actual future develop- ment of income for tax purposes and hence the realisability of deferred tax assets, however, may Management estimates and judgements. Preparation of consolidated financial statements pursuant deviate from the estimation made when the deferred taxes are capitalised. to IFRS requires assumptions and estimates to be made, which have an impact on the recognised value of the assets and liabilities carried on the balance sheet, on income and expenses and on the disclosure Further information on the assumptions and estimates upon which these consolidated financial of contingent liabilities. statements are based can be found in the explanations of the individual items. Amongst other things, these assumptions and estimates relate to the accounting and measurement of All assumptions and estimates are based on the circumstances and forecasts prevailing on the provisions. With regard to non-current provisions, the discount factor to be applied is an important balance-sheet date. Furthermore, as of the balance-sheet date, realistic assessments of overall estimate, in addition to the amount and timing of future cash flows. The discount factor for pension economic conditions in the sectors and regions in which RWE conducts operations are taken into obligations is determined on the basis of yields on high-quality, fixed-rate corporate bonds on the consideration with regard to the prospective development of business. Actual amounts may deviate financial markets as of the balance-sheet date. from the estimated amounts if the overall conditions develop differently than expected. In such cases, the assumptions, and, if necessary, the carrying amounts of the affected assets and liabilities are adjusted. 119 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information As of the date of preparation of the consolidated financial statements, it is not presumed that there will RWE’s credit rating is influenced by a number of qualitative and quantitative factors. These include be any material changes compared to the assumptions and estimates. aspects such as the amount of cash flows and debt as well as market conditions, competition, and the political framework. Our hybrid bonds also have a positive effect on our rating. The leading rating Capital management. The focus of RWE’s financing policy is on ensuring uninterrupted access to the agencies, Moody’s and Fitch, classify part of hybrid capital as equity. capital market. The goal is to be in a position to refinance maturing debts and finance the operating activities at all times. Maintaining a solid rating and a positive operating cash flow serve this purpose. RWE’s creditworthiness is currently rated ‘Baa3’ by Moody’s and ‘BBB’ by Fitch. In March 2020, Moody’s The management of RWE’s capital structure is oriented towards a leverage factor of three or less. This electricity from renewable energy. Our rating thus remains in the investment-grade range. RWE’s indicator is calculated by adding material non-current provisions to net financial debt and comparing short-term credit ratings are ‘P-3’ (previous year: ‘P-3’) and ‘F2’ (previous year: ‘F2’), respectively. raised RWE’s outlook to ‘positive’ in light of the ongoing progress towards becoming a producer of the resulting figure to the adjusted EBITDA of the core business. RWE’s liabilities of relevance to net debt primarily consist of hybrid bonds and provisions for pensions, nuclear waste management, and wind farms. RWE’s capital structure changed during the reporting period, primarily due to the capital increase amounting to 10 % of the capital stock, which generated gross proceeds of approximately €2 billion. In contrast to this, investment in wind and solar projects in particular increased compared to the previous year. Additionally, the net debt of the continuing operations was strongly affected by the inflows of variation margins on forward transactions with electricity, commodities and CO2 certificates. Variation margins are payments with which transaction partners mutually collateralise profit and loss positions resulting from the daily revaluation of active contracts. However, their influence on cash flows is tempo- rary and ends once the transactions are realised. While the capital increase resulted in an increase in financial assets, an opposite effect was felt in capital expenditures. In total, net financial debt amounted to €4.4 billion on 31 December 2020 and was thus lower than at the end of 2019 (previous year: €7.2 billion). Furthermore, net debt provisions rose by €0.3 billion to €11.3 billion (previous year: €11.0 billion, excluding provisions for mining damage). On average, provisions have a very long duration; their level is primarily determined by external factors such as the general level of interest rates. A precise calculation of net debt and net financial debt is presented on page 28 of the review of operations. As of 31 December 2020, the leverage factor was 1.7 and was thus below the planned ceiling. 120 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Changes in accounting regulations New accounting policies The International Accounting Standards Board (IASB) has approved several amendments to existing The IASB issued further standards and amendments to standards, which were not yet mandatory in the IFRSs, which are effective for the RWE Group as of fiscal 2020 due to EU endorsement: EU in fiscal 2020. These standards and amendments to standards, which are not expected to have any • Amendments to References to the Conceptual Framework in IFRS Standards (2018), • Amendments to IFRS 3 Definition of a Business (2018), • IFRS 17 Insurance Contracts (2017) including Amendments to IFRS 17 (2020), • Amendments to IAS 1 and IAS 8 Definition of Material (2018), • Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or • Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform (2019), Non-current (2020) and Presentation of Financial Statements: Classification of Liabilities as Current see page 174 in the Notes, or Non-current – Deferral of Effective Date (2020), • Amendments to IFRS 16 Covid-19-Related Rent Concessions (2020). • Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework (2020), material effects on RWE’s consolidated financial statements, are listed below: • Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use (2020), • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts – These new policies do not have any material effects on the RWE Group’s consolidated financial Cost of Fulfilling a Contract (2020), statements. • Annual Improvements to IFRS Standards 2018-2020 (2020), • Amendments to IFRS 4 Extension of the Temporary Exemption from Applying IFRS 9 (2020), • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (2020), • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (2021), • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (2021), • Proposed amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 (2021). 121 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Notes to the Income Statement (1) Revenue Revenue is recorded when the customer has obtained control over goods or services. We recognise income from the sale of the electricity generated by all of RWE Group’s generation technologies and the consumer business in revenue. Revenue resulting from the commercial optimisa- (2) Other operating income Other operating income € million Income from own work capitalised Income from changes in product inventories tion of generation dispatch is based on the net sale price, after deduction of the relevant material costs. Release of provisions By contrast, all other revenue from our generation activities and the consumer business is reported on a Cost allocations / refunds gross basis. In the year under review, RWE generated external revenue with two large customers in the amount of €6,963 million and €1,544 million (previous year: €7,455 million and €1,472 million) in the Supply & Trading segment. A breakdown of revenue by division, geographical region and product is contained in the segment reporting on page 183 et seqq. The item ‘Natural gas tax / electricity tax’ comprises the taxes paid directly by Group companies. Certain performance obligations of the RWE Group were not yet or not yet fully met by the end of the Disposal and write-back of non-current assets including income from deconsolidation Income from derivative financial instruments Compensation and insurance benefits Income from leases Currency gains Miscellaneous 2020 2019 84 10 11 175 128 3,721 66 29 71 636 4,931 67 30 10 116 525 897 34 16 3,061 4,756 fiscal year. The €3,154 million in revenue due from these performance obligations (previous year: Income from derivative financial instruments mainly stems from our energy trading activities. €4,276 million) is expected to be received over the following three years. The receipt of this revenue will depend on when these performance obligations to the customer are met. It does not include future In the Hydro / Biomass / Gas segment, write-backs of €71 million were recognised for the Scottish revenue from contracts with an original contractual term of twelve months or less. biomass-fired power station Markinch (recoverable amount: €0.2 billion) in the previous year. This was predominantly due to changed assumptions regarding subsidies in the renewable energy business. The write-ups were fully allocated to property, plant and equipment. Furthermore, in the Hydro / Biomass / Gas segment, write-backs of €363 million were recognised for the German Gas and Hydroelectric Power Plants cash-generating unit along with the associated power purchase agreements (recoverable amount: €0.5 billion) in the previous year. This was largely due to the new definition of cash-generating units in the previous European Power segment. All of the write-backs were allocable to property, plant and equipment. 122 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In the previous year, miscellaneous income contained the compensatory payments of €2,600 million for (4) Staff costs the early exit from our lignite business awarded by the German government. Income from the disposal of non-current financial assets and loans is disclosed under income from investments if it relates to investments; otherwise it is recorded as part of the financial result as is the income from the disposal of current marketable securities. To improve the presentation of the development of business, we state unrealised and realised income from contracts measured at fair value of the Supply & Trading segment as net amounts. The net amount totalled €3,613 million in 2020 (previous year: €258 million). Staff costs € million Wages and salaries Cost of social security, pensions and other benefits 2020 2019 1,891 2,124 474 2,365 402 2,526 (3) Cost of materials Cost of materials € million Cost of raw materials and of goods for resale Cost of purchased services 2020 2019 8,540 1,274 9,814 7,663 1,415 9,078 Number of employees 2020 2019 Employees covered by collective agreements and other employees Employees not covered by collective agreements 13,272 6,358 19,630 28,214 9,868 38,082 The number of employees is arrived at by conversion to full-time positions, meaning that part-time and fixed-term employees are included in accordance with the ratio of the part-time work or the duration of the employment to the annual employment time. On average, 669 trainees were employed; trainees are not The cost of materials primarily includes expenses for the input materials of power plants. Expenses for included in the headcount figures. coal of €75 million (previous year: €195 million) were recognised at the market price prevailing at settlement. In the previous year, the stated number of employees (average for the year) included the discontinued innogy operations up to end-Q2 2019. In that period, the discontinued innogy operations accounted for In the year under review, impairments of €140 million were recognised for stock materials and coal 14,663 wage earners and other personnel and 4,561 salaried staff. On average, 1,280 trainees were inventories. These impairments were based on lower market prices and impairment tests performed for employed in the previous year, of which 659 were assigned to the innogy – discontinued operations the cash-generating units Garzweiler, Hambach, Inden and the hard coal-fired power stations (see page segment. 124 in the Notes). In the previous year, impairments of €21 million were recognised for coal inventories, due to lower market prices. (5) Depreciation, amortisation and impairment losses Depreciation, amortisation and impairment losses 2020 2019 € million Intangible assets Property, plant and equipment 123 156 2,998 3,154 107 3,059 3,166 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Depreciation, amortisation and impairment losses contain the following impairments: In the Offshore Wind segment, an impairment loss of €225 million was recognised in the previous year Impairments € million Intangible assets Property, plant and equipment 2020 2019 changed price and cost expectations. for the Nordsee Ost offshore wind farm (recoverable amount: €0.6 billion). This primarily resulted from 18 1,712 1,730 46 1,922 1,968 Furthermore, an impairment loss of €69 million was recognised in the previous year for gas storage facilities (of which €65 million for property, plant and equipment and €4 million for intangible assets) in the Supply & Trading segment, primarily due to changed price expectations (recoverable amount: €0.0 billion). In the Hydro / Biomass / Gas segment, the impairment test for the Dutch Power Plant Portfolio cash- In the previous year, the legal steps to reduce and end electricity generation from lignite and hard coal in generating unit resulted in a write-down of €557 million (recoverable amount: €0.7 billion), due to the Germany resulted in the split-up and spin-off of the two former Lignite & Nuclear and German Power deterioration of market conditions in the Netherlands. Plant Portfolio cash-generating units in the Coal / Nuclear segment (previously: European Power The impairment tests performed in the Coal / Nuclear segment resulted in the recognition of impair- segment). ments on property, plant and equipment in the amount of €791 million. This was mainly due to changed The impairment test performed last year in the Coal / Nuclear segment for this reason resulted in the market conditions and specification of the coal phase-out plans. Of these impairments, €579 million recognition of an impairment loss of €400 million (recoverable amount: – €0.2 billion) for the new was related to the Garzweiler cash-generating unit (recoverable amount: €0.8 billion), €114 million to Hambach cash-generating unit, of €114 million for the new Inden cash-generating unit (recoverable the Hambach cash-generating unit (recoverable amount: –€0.7 billion) and €98 million to the Inden amount: €0.0 billion) and of €253 million for the new Garzweiler cash-generating unit (recoverable cash-generating unit (recoverable amount: –€0.4 billion). With the exception of the property and amount: €1.3 billion). These effects were solely due to the agreement reached with the German buildings reported at market value, the property, plant and equipment of the Hambach and Inden units government to phase out electricity generation from lignite early. In the previous year, €240 million in has been written down in full. impairments were attributable to changes in provisions, which were capitalised in the ‘property, plant Additionally, impairments of €231 million were recognised on property, plant and equipment of the hard and equipment’ item. coal-fired power stations in the Coal / Nuclear segment (recoverable amount: €0.0 billion), in relation to The impairment test performed last year in the Hydro / Biomass / Gas segment (previously: European the phase-out of hard coal. The power plants Ibbenbüren B and Westfalen E successfully participated in Power segment) led to reversals of write-downs of €363 million for the new cash-generating unit the first round of decommissioning auctions and were thus shut down early as of 1 January 2021. German Gas and Hydroelectric Power Plants, along with the associated power purchase agreements, Decommissioning is subject to an assessment of the systemic relevance of the two plants by the which was recognised in other operating income (recoverable amount: €0.5 billion). For the first time, the German Network Agency. recoverable amount was calculated separately for each of the assets in the hard coal business in the Coal / Nuclear segment (previously: European Power segment), owing to the changed regulatory environment. This resulted in impairment losses of €76 million (recoverable amount: €0.2 billion). These effects stem from the compensation lost due to the spin-off of the hard coal-fired power stations along with the associated power purchase agreements from the former cash- generating unit. These agreements were also valued separately for the first time last year. 124 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In addition, an impairment loss of €693 million (recoverable amount: €1.1 billion) was recognised in the (6) Other operating expenses previous year for the Dutch Power Plant Portfolio cash-generating unit in the the Hydro / Biomass / Gas segment (previously: European Power segment). This was due to the early phase-out of electricity Other operating expenses 2020 2019 generation from hard coal in the Netherlands. Other impairments on intangible assets and property, plant and equipment were recognised primarily on the basis of cost increases and changes in price expectations. € million Maintenance and renewal obligations Additions to provisions / reversals Structural and adaptation measures Recoverable amounts are generally determined on the basis of fair values less costs to sell; in the Legal and other consulting and data processing services Onshore Wind / Solar segment, they are also determined on the basis of values in use. Fair values are determined using valuation models based on planned cash flows. In the fiscal year, the valuation models were based on discount rates (after taxes) in the range of 2.75 % to 4.50 % (previous year: 2.50 % to 4.75 %; in the previous ‘innogy – continuing operations’ segment, they were based on discount rates [before taxes] of 3.90 % and 4.25 %). Our key planning assumptions relate to the development of wholesale prices of electricity, crude oil, natural gas, coal and CO2 emission allowances, market shares and regulatory framework conditions. Based on the use of internal planning assumptions, the deter- mined fair values are assigned to Level 3 of the fair value hierarchy. 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 Other taxes (primarily on property) Miscellaneous 499 48 12 301 49 32 82 51 507 30 56 40 505 1,814 151 273 4 24 61 65 70 42 65 29 243 1,950 151 3,254 Expenses from derivative financial instruments mainly result from our energy trading activities. In the previous year, additions to provisions primarily related to the nuclear energy and mining business. 125 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (7) Income from investments (8) Financial result 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 Financial result 2020 2019 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 2020 2019 € million Interest and similar income Other financial income Financial income 375 – 82 6 4 11 – 61 314 321 Interest and similar expenses 1 1 5 1 8 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 329 Other finance costs Finance costs 283 1,650 1,933 296 37 203 15 1,836 2,387 – 454 185 503 688 258 49 723 109 487 1,626 – 938 The financial result breaks down into net interest, interest accretion to provisions, other financial income and other finance costs. Interest accretion to provisions contains the annual amounts of accrued interest. It is reduced by the imputed interest income on plan assets for the coverage of pension obligations. Due to the early end of electricity generation from lignite resulting from the German coal phase-out, in the previous year the real discount rate used to calculate provisions for mining damage was reduced and the associated 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 €35 million in the year under review (previous year: €26 million). Net interest essentially includes interest income from interest- bearing securities and loans, income and expenses relating to marketable securities, and interest expenses. 126 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In the year under review, €61 million in borrowing costs were capitalised as costs in connection with the (9) Taxes on income acquisition, construction or production of qualifying assets (previous year: €39 million). The underlying capitalisation rate ranged from 3.0 % to 3.7 % (previous year: from 3.7 % to 4.0 %). Taxes on income € million Net interest € million Interest and similar income Interest and similar expenses 2020 2019 Current taxes on income Deferred taxes 283 296 – 13 185 258 – 73 2020 2019 – 122 485 363 – 136 44 – 92 Of the deferred taxes, €439 million is related to temporary differences (previous year: €29 million). In the year under review, changes in valuation allowances for deferred tax assets amounted to €418 million Net interest stems from financial assets and liabilities, which were allocated to the following measure- (previous year: €572 million). ment categories pursuant to IFRS 9: Interest result by category € million Debt instruments measured at amortised cost 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 2020 2019 relating to prior periods. Current taxes on income contain €16 million in net tax expenses (previous year: income of €74 million) Due to the utilisation of tax loss carryforwards unrecognised in prior years, current taxes on income were reduced by €10 million (previous year: €37 million). Expenses from deferred taxes declined by €7 million (previous year: €0 million), due to reassessments of and previously unrecognised tax loss carryforwards. 78 3 14 187 – 295 – 13 123 30 16 16 – 258 – 73 Other financial income includes €28 million in gains realised from the disposal of marketable securities (previous year: €19 million). Of the other finance costs, €17 million (previous year: €5 million) stem from realised losses on the disposal of marketable securities. 127 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Income taxes recognised in other comprehensive income 2020 2019 Tax reconciliation 2020 2019 € million Fair valuation of equity instruments Fair valuation of debt instruments 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. 11 – 9 107 – 40 69 € million – 3 Income before tax – 12 Theoretical tax expense Differences to foreign tax rates Tax effects on Tax-free dividends Other tax-free income – 288 176 – 127 Taxes in the amount of €311 million (previous year: €394 million) were offset directly against equity. 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 % 1,196 390 – 98 – 123 – 31 29 – 30 377 – 1 86 – 69 – 167 363 30.4 – 752 – 245 – 37 – 49 – 10 30 – 55 175 – 48 29 207 – 89 – 92 12.2 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. 128 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Notes to the Balance Sheet (10) Intangible assets Intangible assets € million Cost Balance at 1 Jan 2020 Additions / disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2020 Accumulated amortisation /  impairment losses Balance at 1 Jan 2020 Additions / disposals due to changes in the scope of consolidation Amortisation / impairment losses in the reporting period Transfers Currency translation adjustments Disposals Balance at 31 Dec 2020 Carrying amounts Balance at 31 Dec 2020 Development costs Concessions, patent rights, licences and similar rights Customer relationships and similar assets Goodwill Prepayments Total 40 −1 −1 1 37 36 2 −2 −1 1 34 3 3,713 161 19 6 −98 38 3,763 1,799 −155 138 2 −6 36 1,742 2,021 129 2,549 108 −46 8 2,603 6 4 10 310 −1 −13 296 6 −1 16 −1 20 276 2,603 10 6,618 268 23 5 −158 47 6,709 1,841 −156 156 −8 37 1,796 4,913 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Intangible assets € million Cost Balance at 1 Jan 2019 Additions / disposals due to changes in the scope of consolidation 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 Development costs Concessions, patent rights, licences and similar rights Customer relationships and similar assets Goodwill Prepayments Total 36 1 2 1 40 33 −2 4 1 36 4 2,214 1,404 22 5 73 5 3,713 1,751 −57 98 7 1,799 1,914 1,718 794 37 2,549 9 2 −5 6 1 304 5 310 1 5 6 304 2,549 6 3,978 2,503 26 1 115 5 6,618 1,785 −59 107 8 1,841 4,777 130 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In the reporting period, the RWE Group’s total expenditures on research and development amounted In the third quarter of every fiscal year, an impairment test is performed to determine if there is any need to €20 million (previous year: €25 million). to write down goodwill. In doing so, goodwill is allocated to the cash-generating units. Goodwill breaks down as follows: The recoverable amount of the cash-generating unit is determined, which is defined as the higher of fair Goodwill € million Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading 31 Dec 2020 31 Dec 20191 party would pay to purchase the cash-generating unit as of the balance-sheet date. Value in use value less costs to sell or value in use. Fair value is the best estimate of the price that an independent third reflects the present value of the future cash flows which are expected to be generated with the 1,376 108 113 1,006 2,603 1,422 cash-generating unit. 121 1,006 2,549 Fair value less costs to sell is assessed from an external perspective and value in use from a company- internal perspective. Values are determined using a business valuation model, based on planned future cash flows. These cash flows, in turn, are based on the business plan, as approved by the Executive Board and valid at the time of the impairment test. They pertain to a detailed planning period of three years. In 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; certain justifiable cases, a longer detailed planning period is taken as a basis, insofar as it is necessary see page 109 in the Notes. 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 New cash-generating units were formed as of 1 January 2020. In doing so, goodwill in the amount of valuations are taken as a basis for determining fair value. Based on the use of internal planning assump- €606 was transferred from the former cash-generating unit innogy - continuing operations to the new tions, the determined fair values are assigned to Level 3 of the fair value hierarchy. cash-generating unit Offshore Wind and in the amount of €121 million to the new cash-generating unit Hydro / Biomass / Gas. Goodwill of €816 million was transferred from the former cash-generating unit Mid-term business plans are based on country-specific assumptions regarding the development of key 'operations acquired from E.ON’ to the new cash-generating unit Offshore Wind. economic indicators such as gross domestic product, consumer prices, interest rate levels and nominal The impairment test carried out in relation to the formation of new cash-generating units did not result in any impairments. Our key planning assumptions for the business segments active in electricity and gas markets relate to wages. These estimates are, amongst others, derived from macro- economic and financial studies. In the year under review, goodwill increased by €108 million as a result of the first-time consolidation of Nordex's wind and solar projects in the Onshore Wind segment. This goodwill passed the impairment test the development of wholesale prices of electricity, crude oil, natural gas, coal and CO2 emission allowances, market shares and regulatory framework conditions. in the fourth quarter of 2020. In the previous year, goodwill increased by €794 million upon the first-time The discount rates used for business valuations are determined on the basis of market data. During the consolidation of the acquired E.ON operations. This goodwill passed the impairment test in the fourth period under review, they were 4.25 % (previous year: 5.50 %) for the cash-generating unit Supply & Trading, quarter of 2019. In the year under review, goodwill declined by €8 million due to the deconsolidation of 4.25 % for Offshore Wind (in the previous year: 4.00 % for the former segment innogy – continuing Georgia Biomass in the Hydro / Biomass / Gas cash-generating unit. operations) and 3.75 % for Hydro / Biomass / Gas. 131 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In the Offshore Wind cash-generating unit, we used a growth rate of 0.5 % as a basis for extrapolating future cash flows going beyond the detailed planning period. For all of the other cash-generating units, we do not base the extrapolation of future cash flows going beyond the detailed planning period on growth rates. In the previous year, no growth rates were used as a basis. The growth rate for each division is generally derived from experience and expectations of the future and does not exceed the long-term average growth rates of the respective markets in which the Group companies are active. The annual cash flows assumed for the years after the detailed planning period include as a deduction capital expenditure in the amount necessary to maintain the scope of business. As of the balance-sheet date, the recoverable amounts of the cash-generating units, which are determined as the fair value less costs to sell, were higher than their carrying amounts. The surpluses react especially sensitively to changes in the discount rate, the growth rate – insofar as such are used in the model – and cash flows in terminal value. Of all of the cash-generating units, the Hydro / Biomass / Gas cash-generating unit exhibited the smallest surplus of recoverable amount over the carrying amounts. The recoverable amount was €0.2 billion higher than the carrying amount. Impairment would have been necessary if the calculations had used an after-tax discount rate increased by more than 0.7 percentage points to above 4.4 %, or long-term cash flows reduced by more than 9 %. 132 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 (11) Property, plant and equipment Property, plant and equipment € million Cost Balance at 1 Jan 2020 Additions / disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2020 Accumulated depreciation / impairment losses Balance at 1 Jan 2020 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 2020 Carrying amounts Balance at 31 Dec 2020 Total 59,292 1,710 3,773 −6 −1,061 862 62,846 40,276 2,640 2,998 −283 623 63 44,945 4,224 −236 2,389 −1,326 −185 15 4,851 873 88 −24 −1 3 933 3,918 17,901 989 15 69 7 −10 36 1,034 770 17 115 −6 34 862 172 5,323 51 443 23 −58 90 5,692 3,128 66 511 −13 22 9 3,661 2,031 48,756 1,880 872 1,290 −808 721 51,269 35,505 2,557 2,284 24 −263 564 54 39,489 11,780 133 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Property, plant and equipment € million Cost Balance at 1 Jan 2019 Additions / disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2019 Accumulated depreciation / impairment losses Balance at 1 Jan 2019 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 1 Including the effect of the initial adoption of IFRS 16 in the amount of €353 million. 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 934 19 66 13 4 47 989 756 −12 64 5 4 47 770 219 2,061 1,295 1,077 −239 45 15 4,224 791 88 −1 5 873 3,351 4,868 282 300 1 23 151 5,323 3,073 −51 222 −6 8 91 27 3,128 2,195 43,733 3,935 1,153 217 401 683 48,756 34,214 −640 2,685 −2 169 509 412 35,505 13,251 134 Total 51,5961 5,531 2,596 −8 473 896 59,292 38,834 −703 3,059 −4 181 652 439 40,276 19,016 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Property, plant and equipment in the amount of €1,590 million (previous year: €1,024 million) were subject During the reporting period, RWE sold an office building to an external investor within the framework of a to restrictions from land charges, chattel mortgages or other restrictions. Disposals of property, plant and sale-and-leaseback transaction. The fixed lease term of the leasing contract is 17.5 years. equipment resulted from sale or decommissioning. The following table shows the development of right-of-use assets recognised in property, plant and Property, plant and equipment includes owned assets as well as right-of-use assets from leases of which equipment: RWE is the lessee. These leases primarily comprise long-term rights of use to leased office buildings and land (e. g. leaseholds, properties for renewable energy production) and rights of use to leased assets relating to vehicle fleets and power plants. Right-of-use assets Development in 2020 € million Cost Buildings Land Technical plant and machinery Pumped storage power stations Vehicle fleet Other plant, factory and office equipment Balance at 1 Jan 2020 Additions Depreciation, amortisation and impairments Disposals Other changes1 Balance at 31 Dec 2020 70 666 43 261 18 23 1,081 121 49 2 13 17 7 209 17 38 6 10 11 13 95 7 2 1 1 1 12 -6 -44 -9 -1 -60 161 631 29 264 22 16 1,123 1 Other changes comprise transfers, additions, currency translation adjustments as well as additions and disposals in the scope of consolidation. 135 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Right-of-use assets Development in 2019 € 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 8 1 279 7 204 9 500 70 666 43 261 18 23 1,081 1 Other changes comprise transfers, additions, currency translation adjustments as well as additions and disposals in the scope of consolidation. 136 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Disclosure on the corresponding lease liabilities and interest expenses can be found in Notes (8) The following payment claims resulted from these operating leases: Financial result, (23) Financial liabilities and (27) Reporting on financial instruments. In addition, leases had the following effect on the RWE Group’s earnings and cash flows in the year under Nominal lease payments from operating leases € million 31 Dec 2020 31 Dec 2019 8 7 5 5 4 4 7 6 6 6 37 55 review: Effects of leases on income and cash flows € million RWE as lessee Expenses from short-term leases Expenses from leases for low-value assets Expenses from variable lease payments not considered in the measurement of lease liabilities Income from subleases Gains or losses on sale-and-leaseback transactions Total cash outflows from leases RWE as lessor Income from operating leases 2020 2019 79 1 21 6 2 107 20 14 18 60 13 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 Leases primarily relating to office buildings and wind farm sites that have been contractually agreed, but not begun yet, lead to future lease payments of €187 million (previous year: €195 million). Moreover, potential lease payments predominantly relating to leases of wind farm space were disregarded when valuing lease liabilities. This relates to €405 million (previous year: €471 million) in variable payments which may come due depending on generation volumes and €97 million (previous year: €100 million) in potential payments associated with extension and termination options. In addition to right-of-use assets, property, plant and equipment also include land and buildings leased as operating leases by RWE as lessor. The carrying amount of these assets totalled €180 million (previous year: €193 million) as of 31 December 2020. 137 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (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 € 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. 138 Amprion GmbH, Dortmund KELAG-Kärntner Elektrizitäts-AG /  Kärntner Energieholding Beteiligungs GmbH (KEH), Klagenfurt (Austria) 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019 5,953 2,838 2,001 3,488 829 5,225 1,825 2,012 2,496 638 829 638 1,780 1,664 349 946 266 393 198 591 383 869 285 383 198 581 12,622 14,773 1,300 1,285 701 -35 666 25 25 % 523 –22 501 25 25 % 112 -47 65 19 49 % 93 –15 78 15 49 % RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Amprion GmbH, headquartered in Dortmund, Germany, is a transmission system operator (TSO) for KELAG-Kärntner Elektrizitäts-AG, headquartered in Klagenfurt, Austria, is a leading Austrian energy the electricity sector, pursuant to the German Energy Act (EnwG). Amprion’s main shareholder is a supplier in the fields of electricity, district heating and natural gas. RWE has an interest of 49 % in Kärntner consortium of financial investors led by Commerz Real, a subsidiary of Commerzbank. Energieholding Beteiligungs GmbH (KEH), KELAG’s largest shareholder. 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 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019 21 -28 -7 172 58 41 99 246 184 -2 182 1,658 88 16 104 1,771 The RWE Group holds shares with a book value of €3 million (previous year: €3 million) in associates and joint ventures, which are subject to temporary restrictions or conditions in relation to their distributions of profits, due to provisions of loan agreements. 139 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (13) Other non-current financial assets (15) Other receivables and other assets Other financial assets encompass non-consolidated subsidiaries, other investments and non-current securities. Other receivables and other assets 31 Dec 2020 31 Dec 2019 Non-current securities amounting to €29 million and €4 million (previous year: €29 million and € million Non- current Current Non- current Current €4 million) were deposited in trust for RWE AG and its subsidiaries, in order to cover credit balances Derivatives 675 8,109 661 11,447 stemming from the block model for pre-retirement part-time work, pursuant to Sec. 8a of the Pre-Retire- ment Part-Time Work Act (AltTZG) and from the management of long-term working 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 Capitalised surplus of plan assets over benefit obligations Prepayments for items other than inventories CO2 emission allowances Miscellaneous other assets1 Financial receivables 31 Dec 2020 31 Dec 2019 € million Non- current Current Non- current Current of which: financial assets of which: non-financial assets 172 153 148 446 1,117 9,820 8,452 1,368 144 407 758 2,462 3,276 12,756 824 11,564 2,452 1,192 2,588 3,435 855 2,580 Loans to non-consolidated subsidiaries and investments 105 1 103 Collateral for trading activities Other financial receivables Accrued interest Miscellaneous other financial receivables 2,154 43 284 2,482 26 131 25 128 1 1,638 39 681 2,359 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 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 our early exit from the lignite business awarded by the German government (previous year: €2,600 million). Companies of the RWE Group deposited collateral for the trading activities stated above for exchange- based and over-the-counter transactions. These are to guarantee that the obligations from the Furthermore, €86 million of the miscellaneous other assets (previous year: €43 million) were allocable to trans actions are discharged even if the development of prices is not favourable for RWE. Regular government grants awarded in relation with co-firing biomass in two Dutch power plants. replacement of the deposited collateral depends on the contractually agreed thresholds, above which collateral must be provided for the market value of the trading activities. 140 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (16) Deferred taxes As of 31 December 2020, RWE reported deferred tax claims which exceeded the deferred tax liabilities Deferred tax assets and liabilities principally stem from the fact that measurements in the IFRS by €73 million (previous year: €144 million), in relation to companies which suffered a loss in the current statements differ from those in the tax bases. As of 31 December 2020, no deferred tax liabilities were or previous period. The basis for the recognition of deferred tax assets is the judgement of the manage- recognised for the difference between net assets and the carrying value of the subsidiaries and ment that it is likely that the companies in question will generate taxable earnings, against which associates for tax purposes (known as ‘outside basis differences’) in the amount of €820 million unutilised tax losses and deductible temporary differences can be applied. (previous year: €969 million), as it is neither probable that there will be any distributions in the foreseeable future, nor will the temporary differences reduce in the foreseeable future. €3,415 million and €4,058 mil- The capitalised tax reduction claims from loss carryforwards result from the expected utilisation of lion of the gross deferred tax assets and liabilities, respectively, will be realised within twelve months previously unused tax loss carryforwards in subsequent years. (previous year: €5,316 million and €6,166 million). The following is a breakdown of deferred tax assets and liabilities by item: corporate income tax loss carryforwards and trade tax loss carryforwards for which no deferred tax claims have been recognised amounted to €3,065 million and €2,166 million, respectively (previous It is sufficiently certain that these tax carryforwards will be realised. At the end of the reporting period, 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 2020 31 Dec 20191 year: €1,492 million and €879 million). Assets Liabilities Assets Liabilities 1,465 2,539 58 3 848 1,519 6,432 687 1,382 85 653 2,033 4,840 67 14 1,166 1,450 2,437 3,876 €828 million in corporate income tax loss carryforwards for which no deferred tax claims have been recognised will apply to the following six years. The other loss carryforwards do not have any time limits, but they are mostly not expected to be used. As of 31 December 2020, temporary differences for which no deferred tax assets were recognised amounted to €13,216 million (previous year: €12,791 million). In the year under review, deferred tax income of €42 million arising from the currency translation of foreign financial statements was offset against equity (previous year: deferred tax expenses of €14 million). 47 40 50 2,290 8,740 148 487 3,866 7,117 125 23 4,921 6,432 7,265 8,740 −4,524 −4,524 −6,576 −6,576 397 1,908 689 2,164 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 141 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (17) Inventories Inventories € million (19) Cash and cash equivalents 31 Dec 2020 31 Dec 2019 Cash and cash equivalents 31 Dec 2020 31 Dec 2019 Raw materials, incl. nuclear fuel assemblies and earth excavated for lignite mining Work in progress – goods / services Finished goods and goods for resale Prepayments 579 50 999 4 728 33 839 −15 1,632 1,585 € million Cash and demand deposits 4,764 3,192 Marketable securities and other cash investments (maturity less than three months from the date of acquisition) 10 4,774 3,192 RWE keeps demand deposits exclusively for short-term cash positions. For cash investments, banks are selected on the basis of various creditworthiness criteria, including their rating from one of the three The carrying amount of inventories acquired for resale purposes was €964 million (previous year: renowned rating agencies – Moody’s, Standard & Poor’s and Fitch – as well as their equity capital and €605 million). As in the previous year, this entire amount related to gas inventories in the reporting prices for credit default swaps. As in the previous year, interest rates on cash and cash equivalents were period. at market levels in 2020. 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 income statement at the end of the month. (18) Marketable securities Of the current marketable securities, €4,216 million were fixed-interest marketable securities (previous year: €2,809 million) with a maturity of more than three months from the date of acquisition, and €3 million were stocks and profit-participation certificates (previous year: €449 million). Marketable securities are stated at fair value. 142 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (20) Equity A breakdown of fully paid-up equity is shown on page 106 et seq. The subscribed capital of RWE AG is structured as follows: Subscribed capital Shares 31 Dec 2020 Number of shares 31 Dec 2019 Number of shares 31 Dec 2020 Carrying amount 31 Dec 2019 Carrying amount in ’000 676,220 in % 100.0 in ’000 614,745 in % 100.0 € million 1,731 € million 1,574 On 18 August 2020, RWE AG decided on a capital increase in return for cash contributions with partial option or convertible bonds. The Executive Board is also authorised to use the treasury shares to utilisation of the approved capital. The company's capital stock was thus increased by 10 % via the discharge obligations from future employee share schemes; in this regard, shareholders’ subscription issue of 61,474,549 new bearer shares, under the exclusion of existing shareholders’ subscription rights. rights shall be excluded. The new shares were placed with institutional investors at a price of €32.55 per share in an accelerated bookbuilding process. As a result of the capital increase, the subscribed capital of RWE AG rose by No treasury shares were held as of 31 December 2020. €157,374,845.44 and its paid-in capital rose to €1,843,621,724.51. Transaction expenses of €11,070,500.71 were offset against retained earnings. In fiscal 2020, RWE AG purchased a total of 314,808 RWE shares for a purchase price of Following this partial utilisation of the approved capital, based on the resolution passed by the General of subscribed capital). Employees of RWE AG and its subsidiaries received a total of 314,808 shares Meeting on 26 April 2018, the Executive Board is still authorised to increase the company’s capital stock for capital formation under the employee share plan. This resulted in total proceeds of €10,516,392.73. with the Supervisory Board’s approval by up to €157,374,848.00 until 25 April 2023 through the issue The difference to the purchase price was offset against freely available retained earnings. of up to 61,474,550 bearer shares in return for contributions in cash and / or in kind (approved capital). In certain cases, with the approval of the Supervisory Board, the subscription rights of shareholders can In the previous year, RWE cancelled the hybrid bond issued by Group companies that was previously be excluded, but this is no longer possible for cash capital increases following the partial utilisation of the classified as equity pursuant to IAS 32 on 6 February 2019. The redemption in the amount of €869 million authorised capital. was effected on 20 March 2019 without refinancing the hybrid bond with fresh hybrid capital. The €10,633,444.15 on the capital market. This is equivalent to €805,908.48 of the capital stock (0.05 % Pursuant to a resolution passed by the Annual General Meeting on 26 April 2018, the Company was further authorised until 25 April 2023 to acquire shares of the Company up to a volume of 10 % of the As a result of equity capital transactions with subsidiary companies which did not lead to a change of capital stock when the resolution on this authorisation was passed, or if the following is lower, when this control, the share of equity attributable to RWE AG’s shareholders changed by a total of –€145 million authorisation is exercised. Based on the authorisation, the Executive Board is also authorised to cancel (previous year: – €149 million) and the share of equity attributable to other shareholders changed by a treasury shares without a further resolution by the Annual General Meeting. Moreover, the Executive total of €395 million (previous year: – €746 million). This includes the subsequent effects of last year's Board is authorised to transfer or sell such shares to third parties under certain conditions and acquisition of the 23.2 % minority interest in the continuing innogy operations (change in RWE AG excluding shareholders’ subscription rights. Furthermore, treasury shares may be issued to holders of shareholders' interest in Group equity of –€298 million) as well as effects from the sale of a 49 % stake in hybrid bond had a 7 % coupon and a theoretically perpetual tenor. 143 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information the offshore UK wind farm Humber Gateway (€163 million change in the share of equity attributable to Dividend proposal RWE AG’s shareholders). We propose to the Annual General Meeting that RWE AG’s distributable profit for fiscal 2020 be Accumulated other comprehensive income (OCI) reflects changes in the fair values of debt instru- ments measured at fair value through other comprehensive income, cash flow hedges and hedges of Distribution of a dividend of €0.85 per share. appropriated as follows: the net investment in foreign operations, as well as changes stemming from foreign currency translation adjustments from foreign financial statements. As of 31 December 2020, the share of accumulated other comprehensive income attributable to investments accounted for using the equity method amounted to – €29 million (previous year: – €22 million). Dividend Profit carryforward Distributable profit €574,787,040.80 €25,220.47 €574,812,261.27 During the reporting year, €3 million in differences from currency translation which had originally been amounted to €0.80 per dividend-bearing share. The dividend payment to shareholders of RWE AG recognised without an effect on income were realised as income (previous year: expense of amounted to €492 million (previous year: €430 million). Based on a resolution of RWE AG’s Annual General Meeting on 26 June 2020, the dividend for fiscal 2019 €523 million). 144 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Non-controlling interests The income and expenses recognised directly in equity (OCI) include the following non-controlling The share ownership of third parties in Group entities is presented in 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 Income and expenses recognised directly 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 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 2020 2019 – 138 43 – 10 – 105 267 – 3 – 29 2 237 132 – 25 – 17 – 42 – 42 (21) Share-based payment The LTIP SPP was introduced in 2016. It uses an internal performance target (net income of relevance to For executives of RWE AG as well as of affiliated companies, Long Term Incentive Plans (LTIPs) are in remuneration) derived from the mid-term planning and takes into account the development of place as share-based payment systems known as Strategic Performance Plans (SPPs). The expenses RWE AG‘s share price. Executives receive conditionally granted virtual shares (performance shares). associated with these are borne by the Group companies which employ the persons holding notional The final number of virtual shares in a tranche is determined based on the achievement of the adjusted stocks. net income target. Each of the issued LTIP SPP tranches has a term of four years before payment is possible. 145 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information RWE AG SPP Start of term 2016 tranche 1 Jan 2016 Number of conditionally granted performance shares 486,436 Term 4 years 2017 tranche 1 Jan 2017 1,338,027 4 years 2018 tranche 1 Jan 2018 883,974 4 years 2019 tranche 1 Jan 2019 932,889 4 years 2020 tranche 1 Jan 2020 935,331 4 years Performance target Adjusted net income Adjusted net income Adjusted net income Adjusted net income Adjusted net income Cap / number of performance shares Cap / payment amount Determination of payment 150 % 200 % 150 % 200 % 150 % 200 % 150 % 200 % 150 % 200 % The payment amount is calculated on the basis of the determined number of performance shares multiplied by the sum of a) the mathematical average of the closing share price of the RWE 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. Change in corporate control /  merger 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 conditions, 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 Cash settlement Payment date 2020 2021 2022 2023 2024 146 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The fair value of the performance shares conditionally granted under SPP included the following sums The performance shares displayed the following development in the fiscal year that just came to a close: on the grant date: Performance Shares from the RWE AG SPP € 2016 tranche 2017 tranche 2018 tranche 2019 tranche 2020 tranche Fair value per share 13.78 11.62 18.80 19.10 26.41 The fair values of the tranches of the RWE AG SPP are based on RWE AG’s current share price plus the dividends per share which have already been paid to the shareholders during the term of the corre- sponding tranche. The limited payment per SPP was implemented via a sold call option. The option value calculated using the Black Scholes Model was deducted. The maximum payments per conditionally granted SPP (= option strike) established in the plan conditions, the discount rates relative to the remaining term as well as the volatilities and expected dividends of RWE AG were considered in Performance Shares from the RWE AG SPP 2016 tranche 2017 tranche 2018 tranche 2019 tranche 2020 tranche Outstanding at the start of the fiscal year 528,513 1,632,128 1,090,995 932,889 Granted Change1 Paid out Outstanding at the end of the fiscal year Payable at the end of the fiscal year -528,513 11,503 -2,505 470,643 935,331 1,643,631 1,088,490 1,403,532 935,331 1,643,631 1 'Change' pertains to the final grant based on target achievement or the subsequent grant or lapse of performance determining the option price. shares. For the SPP options exercised in the previous fiscal year, the average weighted daily share price on the day of exercise was €34.07. During the period under review, expenses for the share-based payment system totalled €38 million (previous year: €34 million). As of the balance-sheet date, provisions for cash-settled share- based payment programmes amounted to €85 million (previous year: €60 million). 147 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (22) Provisions Provisions € million Provisions for pensions and similar obligations Provisions for nuclear waste management Provisions for mining damage Other provisions 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 2020 31 Dec 2019 Non- current Current Total Non- current Current 3,864 6,113 4,729 14,706 339 624 1,366 1,125 648 76 223 363 4,764 19,470 338 85 423 651 18 124 11 70 2 1,332 373 2,581 3,004 3,864 6,451 4,814 3,446 6,355 4,559 15,129 14,360 990 642 1,490 1,136 718 78 223 1,332 736 7,345 361 591 1,390 948 557 78 281 370 4,576 22,474 18,936 368 59 427 622 31 116 4 77 2 771 588 2,211 2,638 Total 3,446 6,723 4,618 14,787 983 622 1,506 952 634 80 281 771 958 6,787 21,574 148 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Provisions for pensions and similar obligations. The company pension plan consists of defined aforementioned rules, the liability of the employer shall remain in place. The boards of RWE Pension- contribution and defined benefit plans. The defined benefit commitments mainly relate to pension bene- streuhand e.V. and RWE Pensionsfonds AG are responsible for ensuring that the funds under manage- fits based on final salary. These are exposed to the typical risks of longevity, inflation and salary ment are used in compliance with the contract and thus fulfil the requirements for recognition as plan increases. assets. In the reporting period, €32 million (previous year: €24 million) was paid into defined contribution plans. In the United Kingdom, it is legally mandated that defined benefit plans are provided with adequate and This includes payments made by RWE for a benefit plan in the Netherlands which covers the commit- suitable assets to cover pension obligations. The corporate pension system is managed by the sec- ments of various employers. This fund does not provide the participating companies with information tor-wide Electricity Supply Pension Scheme (ESPS). Following completion of the E.ON transaction, allowing for the pro-rata allocation of defined benefit obligations, plan assets and service cost. In the dedicated independent sections were formed for RWE for the conventional generation business, for the consolidated financial statements, the contributions are thus recognised analogously to a defined continuing innogy operations and for the renewables business acquired from E.ON. The sections are contribution plan, although this is a defined benefit plan. The pension plan for employees in the Nether- managed by trustees which are elected by members of the pension plans or appointed by the sponsor- lands is administered by Stichting Pensioenfonds ABP (see www.abp.nl). Contributions to the pension ing employers. The trustees are responsible for managing the pension plans. This includes investments, plan are calculated as a percentage rate of employees’ salaries and are paid by the employees and pension payments and financing plans. The pension plans comprise the benefit obligations and plan employers. The rate of the contributions is determined by ABP. There are no minimum funding obliga- assets for the subsidiaries of the RWE Group. It is required by law to assess the required financing of the tions. Approximately €9 million in employer contributions are expected to be paid to the ABP pension pension plans once every three years. This involves measuring pension obligations on the basis of fund in the following fiscal 2021 (prior-year figure for fiscal 2020: €9 million). The contributions are used conservative assumptions, which deviate from the requirements imposed by IFRS. The underlying for all of the beneficiaries. If ABP’s funds are insufficient, it can either curtail pension benefits and actuarial assumptions primarily include the projected life expectancies of the members of the pension future post-employment benefits, or increase the contributions of the employer and employees. In the plans as well as assumptions relating to inflation, imputed interest rates and the market returns on the event that RWE terminates the ABP pension plan, ABP will charge a termination fee. Amongst other plan assets. things, its level depends on the number of participants in the plan, the amount of salary and the age structure of the participants. As of 31 December 2020, we had around 600 active participants in the The last funding valuations of the RWE section and the continuing innogy operations section were carried plan (previous year: approximately 600). out on 31 March 2019. They showed that the RWE section had a financing deficit of £44.3 million, which was rectified with a payment of £48.3 million as of 31 March 2020. The next funding valuation must occur RWE transferred assets to RWE Pensionstreuhand e.V. within the framework of a contractual trust by 31 March 2022. A technical financing deficit of £103.4 million was revealed for the section of the arrangement (CTA) in order to finance the pension commitments of German Group companies. There continuing innogy operations. It was subsequently agreed with the trustees to rectify this deficit with is no obligation to provide further funds. From the assets held in trust, funds were transferred to RWE annual payments of £37.5 million, £36.3 million, £17.0 million and £17.0 million from 2020 to 2023. Pensionsfonds AG to cover pension commitments to most of the employees who have already retired. Following compleition of the E.ON transaction, an agreement was reached with the trustees to draw RWE Pensionsfonds AG falls under the scope of the Act on the Supervision of Insurance Undertakings forward the next valuation to 31 March 2021. A valuation was carried out for the section of the and oversight by the Federal Financial Supervisory Agency (BaFin). Insofar as a regulatory deficit occurs renewables business acquired from E.ON on 31 March 2020. It revealed a financing deficit of in the pension fund, supplementary payment shall be requested from the employer. Independently of the £7 million. From the valuation date, the sponsoring employers and the trustees have 15 months to approve the funding valuation. 149 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The payments to settle the deficit are charged to the participating companies on the basis of a contractu- Provisions for defined benefit plans are determined using actuarial methods. We apply the following al agreement. Above and beyond this, payments are regularly made to finance the newly arising benefit assumptions: obligations of active employees which increase the pension claims. Calculation assumptions in % Discount rate Wage and salary growth rate Pension increase rate 1 Pertains to benefit commitments to employees of the RWE Group in the UK. 31 Dec 2020 31 Dec 2019 Germany Foreign 1 Germany 0.80 2.35 1.30 3.00 1.20 2.35 Foreign 1 2.00 3.00 1.00, 1.60 and 1.75 2.10 and 2.90 1.00, 1.60 and 1.75 1.90 and 2.80 The method for deriving the benchmark interest rate for domestic pension commitments pursuant to IFRS was adjusted at the end of the year. In the bond universe, bonds with a nominal volume of more than €100 million are now taken as a basis. Previously, bonds with a nominal volume of more than €50 million were also taken into account. The resulting benchmark interest rate amounts to 0.80 %. Compared to the previous method, this is 10 basis points higher and results in the recognition of pension commitments which are lower by around €180 million. In the following year, this leads to a decline of €5 million in the service cost and an increase of €2 million in the interest cost. 150 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Composition of plan assets (fair value) 31 Dec 2020 31 Dec 2019 € million Germany1 Equity instruments, exchange-traded funds Interest-bearing instruments Real estate Mixed funds 3 Alternative investments Other 4 1,472 3,785 1 645 711 56 Of which: Level 1 pursuant to IFRS 13 1,449 324 542 23 6,670 2,338 Foreign 2 485 3,956 1,509 412 477 6,839 Of which: Level 1 pursuant to IFRS 13 Of which: Level 1 pursuant to IFRS 13 Germany1 69 116 85 270 1,539 3,620 3 705 685 64 1,519 91 375 438 30 6,616 2,453 6,577 Foreign 2 468 3,502 1,539 661 407 Of which: Level 1 pursuant to IFRS 13 131 33 160 69 393 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 the RWE Group within the British ESPS to cover 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. Our investment policy in Germany is based on a detailed analysis of the plan assets and the pension term. Furthermore, in order to achieve consistently high returns, there is also investment in products commitments and the relation of these two items to each other, in order to determine the best possible which are more likely to offer relatively regular positive returns over time. This involves products with investment strategy (Asset Liability Management Study). Using an optimisation process, portfolios are returns which fluctuate like those of bond investments, but which achieve an additional return over the identified which can earn the best targeted results at a defined level of risk. One of these efficient medium term, such as so-called absolute return products (including funds of hedge funds). portfolios is selected and the strategic asset allocation is determined; furthermore, the related risks are analysed in detail. In the United Kingdom, our capital investment takes account of the structure of the pension obligations as well as liquidity and risk matters. The goal of the investment strategy in this context is to maintain the level The focus of RWE’s strategic investment policy is on domestic and foreign government bonds. In order to of pension plan funding and ensure the full financing of the pension plans over time. To reduce financing increase the average yield, corporate bonds with a higher yield are also included in the portfolio. The costs and earn surplus returns, we also include higher-risk investments in our portfolio. The capital ratio of equities in the portfolio is lower than that of bonds. Investment occurs in various regions. The investment focusses on government and corporate bonds. investment position in equities is intended to earn a risk premium over bond investments over the long 151 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Pension provisions for pension commitments changed as follows: Changes in pension provisions € million Balance at 1 Jan 2020 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 2020 of which: domestic of which: foreign Present value of pension commitments Fair value of plan assets Capitalised surplus of plan assets 16,486 13,193 153 148 238 −17 1,435 −106 −352 8 −718 71 8 17,201 10,503 6,698 201 859 −361 8 245 −690 62 −8 13,509 6,670 6,839 −10 29 172 172 Total 3,446 148 37 −859 −17 1,435 −106 −1 −245 −28 9 8 8 29 3,864 3,833 31 1 Of which: €96 million from initial and subsequent transfers to plan assets and €149 million in cash flows from operating activities. 2 Contained in cash flows from operating activities. 152 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 contributions1 Benefits paid 2 Changes in the scope of consolidation 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. 153 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 2020 31 Dec 2019 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 – 300 903 552 65 47 569 382 523 210 833 489 57 41 537 407 482 259 -792 -486 -63 -41 -518 -339 154 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The sensitivity analyses are based on the change of one assumption each, with all other assumptions Domestic company pensions are subject to an obligation to review for adjustment every three years remaining unchanged. Actual developments will probably be different than this. The methods of pursuant to the Act on the Improvement of Company Pensions (Sec 16 of the German Company Pension calculating the aforementioned sensitivities and for calculating the pension provisions are in agreement. Act (BetrAVG)). Additionally, some commitments grant annual adjustments of pensions, which may The dependence of pension provisions on market interest rates is limited by an opposite effect. The exceed the adjustments in compliance with the legally mandated adjustment obligation. background of this is that the commitments stemming from company pension plans are primarily covered by funds, and mostly plan assets exhibit negative correlation with the market yields of fixed- Some domestic pension plans guarantee a certain pension level, taking into account the statutory interest securities. Consequently, declines in market interest rates are typically reflected in an increase in pension (total retirement earnings schemes). As a result, future reductions in the statutory pension can plan assets, whereas rising market interest rates are typically reflected in a reduction in plan assets. result in higher pension payments by RWE. The present value of pension obligations, less the fair value of the plan assets, equals the net amount of The weighted average duration of the pension obligations was 16 years in Germany (previous year: funded and unfunded pension obligations. 16 years) and 17 years outside of Germany (previous year: 15 years). As of the balance-sheet date, the recognised amount of pension provisions totalled €3,265 million for In fiscal 2021, RWE expects to make €240 million in payments for defined benefit plans of continuing funded pension plans (previous year: €2,889 million) and €599 million for unfunded pension plans operations (previous-year target: €275 million), as direct benefits and contributions to plan assets. (previous year: €557 million). As in the previous year, a substantial portion of the past service cost related to effects in connection with restructuring measures in Germany and severance payments in Great Britain. Provisions for nuclear energy and mining € million Provisions for nuclear waste management Provisions for mining damage Balance at 1 Jan 2020 Additions Unused amounts released Interest accretion Amounts used 6,723 4,618 11,341 29 44 73 −3 −15 −18 17 212 229 −315 −45 −360 Balance at 31 Dec 2020 6,451 4,814 11,265 155 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Provisions for nuclear waste management are recognised in the full amount for the nuclear power the decommissioning and dismantling work can be performed in time after the expiry of the operating plants Biblis A and B, Emsland and Gundremmingen A, B and C, as well as Lingen and Mülheim-Kärlich. permit. Dismantling operations essentially consist of dismantling and removal of the radioactive Provisions for waste disposal for the Dutch nuclear power plant Borssele are included at a rate of 30 %, contamination from the facilities and structures, radiation protection, and regulatory monitoring of the in line with RWE’s stake. dismantling measures and residual operations. Provisions for nuclear waste disposal are almost exclusively reported as non-current provisions, and their We thus subdivide our provisions for nuclear waste management into the residual operation of nuclear settlement amount is discounted to the balance-sheet date. Based on the current state of planning, power plants, the dismantling of nuclear power station facilities as well as the cost of residual material these provisions will essentially be used by the beginning of the 2040s. The discount rate calculated processing and radioactive waste treatment facilities. on the basis of the current level of market interest rates for no-risk cash investments was 0.0 % as of the balance-sheet date (previous year: 0.0 %). The escalation rate based on expectations with regard to general increases in wages and prices and productivity growth was 1.5 % (previous year: 1.5 %). As a result, Provisions for nuclear waste management € million 31 Dec 2020 31 Dec 2019 the real discount rate used for nuclear waste management purposes, which is the difference between Residual operation the discount rate and the escalation rate, amounted to – 1.5 % (previous year: – 1.5 %). An increase Dismantling (decrease) in this rate by 0.1 percentage point would reduce (increase) the present value of the provision Processing of residual material and waste management by roughly €45 million. 2,707 2,007 1,737 6,451 2,840 2,086 1,797 6,723 Excluding the interest accretion, additions to provisions for nuclear waste management are based on quantity-related increases in the provisions and amount to €29 million. In the previous year, €719 mil- Provisions for the residual operation of nuclear power station facilities cover all steps that must be lion was allocable to the nuclear energy obligations assumed from the E.ON subsidiary PreußenElektra taken largely independent of dismantling and disposal but are necessary to ensure that the assets are within the scope of the acquisition of the minority interests in the Gundremmingen nuclear power plant safe and in compliance with permits or are required by the authorities. In addition to works monitoring units. Of the changes in provisions, €14 million was offset against the corresponding costs of nuclear and facility protection, these mainly include service, recurrent audits, maintenance, radiation and fire power plants still in operation and the fuel elements. Prepayments for services in the amount of protection as well as infrastructural adjustments. €8 million were deducted from these provisions. In the reporting period, we also used provisions of €242 million for the decommissioning of nuclear power plants. Decommissioning and dismantling costs Provisions for the dismantling of nuclear power plant facilities include all work done to dismantle plants, had originally been capitalised in a corresponding amount and reported under the cost of the respective parts of plants, systems and components as well as on buildings that must be dismantled to comply with nuclear power plants. the Nuclear Energy Act. They also consider the conventional dismantling of nuclear power plant The provisions of the law on the reassignment of responsibility for nuclear waste disposal stipulate that accountability for the shutdown and dismantling of the assets as well as for packaging radio active Provisions for residual material processing and waste management include the costs of processing waste remains with the companies. The shutdown and dismantling process encompasses all activities radioactive residual material for non-hazardous recycling and the costs of treating radioactive waste following the final termination of production by the nuclear power plant until the plant site is removed produced during the plant’s service life and dismantling operations. This includes the various process- from the regulatory scope of the Nuclear Energy Act. A request to decommission and dismantle the es for conditioning, proper packaging of the low-level and intermediate-level radioactive waste in suitable nuclear power plant will be filed with the nuclear licensing authority during its operating period so that containers and the transportation of such waste to BGZ Gesellschaft für Zwischenlagerung mbH (BGZ), facilities to fulfil legal or other obligations. 156 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information which has been commissioned by the Federal government for intermediate storage. This item also In terms of their contractual definition, provisions for nuclear waste management break down as follows: contains the cost of transporting the waste produced by recycling and of the proper packaging of spent nuclear fuel elements, i.e. the cost of procuring and loading freight and interim storage containers. Commissioned by the plant operator, the internationally renowned company NIS Ingenieurgesellschaft Provisions for nuclear waste management € million 31 Dec 2020 31 Dec 2019 mbH, Alzenau, assesses the prospective residual operation and dismantling costs for the nuclear power Provisions for nuclear obligations, not yet contractually defined plants on an annual basis. The costs are determined specifically for each facility and take into consider- Provisions for nuclear obligations, contractually defined ation the current state of the art, regulatory requirements and previous practical experience from ongoing and completed dismantling projects. Additionally, current developments are also incorporated into the cost calculations. They also include the cost of conditioning and packaging radioactive waste 4,623 1,828 6,451 4,849 1,874 6,723 generated during dismantling operations and the transportation of such waste to BGZ. Further cost The provision for obligations which are not yet contractually defined covers the costs of the remaining estimates for the disposal of radioactive waste are based on contracts with foreign reprocessing operational phase of the operating plants, the costs of dismantling as well as the residual material companies and other disposal companies. Furthermore, the cost estimates are based on plans by processing and waste treatment costs incurred in connection with waste produced as a result of internal and external experts, in particular GNS Gesellschaft für Nuklear-Service mbH, (GNS) Essen. shutdowns. Provisions for contractually defined nuclear obligations relate to all obligations the value of which is specified in contracts under civil law. The obligations include the anticipated residual costs of reprocess- ing and returning the resulting radioactive waste. These costs stem from existing contracts with foreign reprocessing companies and with GNS. Moreover, these provisions also include the costs for transport and intermediate storage containers for and the loading of spent fuel assemblies within the framework of final direct storage. Furthermore, this item also includes the amounts for the professional packaging of radioactive operational waste as well as the in-house personnel costs incurred for the residual operation of plants which are permanently decommissioned. 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. To a large degree, the cost estimates are backed by external expert opinions. 157 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In discounting the amounts used in the coming 30 years, we have oriented ourselves towards the Excluding the interest accretion, additions to provisions for mining damage amounted to €44 million in current market interest rates for risk-free cash investments. Since no market interest rates are available the reporting period. The reason for this was quantity-induced increases in the obligatory volume, of for later periods, a sustainable, long-term interest rate is used to discount the amounts used after the which €16 million was capitalised in the item Property, plant and equipment. Releases of provisions in next 30 years. As in the previous year, the average discount rate was 2.0 %. The effects from the lower the amount of €15 million mainly resulted from the fact that current estimates led to a reduction in the level of market interest rates were compensated by changes in the timing of the structure of the series of anticipated costs of restoration. The interest accretion increased provisions for mining damage by payments. The majority of the provisions still pertains to claims that are expected to materialise over the €212 million. next 30 years. Based on the currently expected price and cost increases, the escalation rate was 1.5 % as in the previous year. The real discount rate applied for mining purposes, which is the difference between the discount rate and the escalation rate, was thus 0.5 % as in the previous year. An increase (decline) in the real discount rate by 0.1 percentage point would reduce (increase) the present value of the provision by around €140 million. Other provisions € 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 Balance at 1 Jan 2020 Additions Unused amounts released Interest accretion Changes in the scope of consoli dation, currency adjustments, transfers Amounts used Balance at 31 Dec 2020 983 622 1,506 952 634 80 281 771 958 6,787 550 90 242 171 110 2 1,337 293 2,795 −46 −36 −95 −6 −89 −1 −58 −16 −213 −560 1 113 81 1 1 197 23 −21 −92 −3 −2 −13 −14 −122 −521 −13 −163 −2 −15 −2 −747 −289 −1,752 990 642 1,490 1,136 718 78 223 1,332 736 7,345 158 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Provisions for staff-related obligations mainly consist of provisions for pre-retirement part-time work (23) Financial liabilities arrangements, severance, outstanding vacation and service jubilees and performance-based pay components. Based on current estimates, we expect most of these to be used from 2021 to 2025. Financial liabilities 31 Dec 2020 31 Dec 2019 Provisions for restructuring obligations pertain mainly to measures for socially acceptable payroll € million downsizing. We currently expect most of these to be used from 2021 to 2038. In so doing, sums ear- Bonds payable1 marked for personnel measures are reclassified from provisions for restructuring obligations to provisions for staff-related obligations as soon as the underlying restructuring measure has been specified. This is the case if individual contracts governing socially acceptable payroll downsizing are signed by affected employees. Bank debt Other financial liabilities Collateral for trading activities Miscellaneous other financial liabilities2 Non- current 549 1,528 1,874 3,951 Current 83 716 448 1,247 Non- current 1,110 965 1,849 3,924 Current 391 400 898 1,689 Provisions for purchase and sales obligations primarily relate to contingent losses from pending transactions. 1 Including hybrid bonds classified as debt as per IFRS. 2 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; From the current perspective, we expect that the majority of the provisions for the dismantling of wind see page 109 in the Notes. farms will be used from 2021 to 2045, and the provisions for other dismantling and retrofitting obligations will be used from 2021 to 2060. The following overview shows the key data on the bonds of the RWE Group as of 31 December 2020: Bonds payable Issuer Outstanding amount RWE AG RWE AG RWE AG Bonds payable € 12 million € 282 million1 US$ 317 million1 1 Hybrid bonds classified as debt as per IFRS. Carrying amount € million 12 281 256 549 Coupon in % Maturity 3.5 3.5 October 2037 April 2075 6.625 July 2075 159 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information On 4 September 2020, a hybrid bond issued by RWE AG which was previously classified as equity (25) Other liabilities pursuant to IAS 32 was cancelled. The redemption in the amount of €539 million was effected on 21 October 2020 without refinancing the hybrid bond with fresh hybrid capital. The hybrid bond had a Other liabilities 31 Dec 2020 31 Dec 2019 2.75 % coupon and a tenor ending in April 2075. € million Non- current Current Non- current1 €31 million of the financial liabilities are secured by mortgages (previous year: €39 million). Other financial Tax liabilities liabilities contain lease liabilities. (24) Income tax liabilities Income tax liabilities contain uncertain income tax items in the amount of €939 million (previous year: €1,174 million). This item primarily includes income taxes for periods for which the tax authorities have not yet finalised a tax assessment and for the current year. Social security liabilities Derivatives Miscellaneous other liabilities of which: financial debt of which: non-financial debt 1 554 599 1,154 640 514 158 14 8,106 725 9,003 8,414 589 2 391 469 862 415 447 Current 129 17 10,088 1,354 11,588 10,303 1,285 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. The principal component of social security liabilities are the amounts payable to social security institutions. Miscellaneous other liabilities contain €221 million in contract liabilities (previous year: €269 million). Moreover, €43 million (previous year: €46 million) in miscellaneous other liabilities were allocable to state investment subsidies primarily granted in connection with the construction of wind farms. 160 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Other information (26) Earnings per share • Debt instruments measured at fair value through other comprehensive 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. Basic and diluted earnings per share are calculated by dividing the portion of net income attributable to • Equity instruments measured at fair value through other comprehensive income: the option to RWE shareholders by the average number of shares outstanding; treasury shares are not taken into recognise changes in fair value directly in equity is exercised. account in this calculation. Earnings per share Net income for RWE AG shareholders € million of which: from continuing operations of which: from discontinued operations • Financial assets measured at fair value through profit or loss: the contractual cash flows of a debt instrument do not solely consist of interest and principal on the outstanding capital or the option to recognise changes in the fair value of equity instruments in other comprehensive income is not exercised. On the liabilities side, non-derivative financial instruments principally include liabilities measured at 2020 995 808 187 2019 8,498 -691 9,189 Number of shares outstanding (weighted average) in ‘000 637,286 614,745 amortised cost. Basic and diluted earnings per share of which: from continuing operations of which: from discontinued operations Dividend per share € € 1.56 1.27 0.29 13.82 -1.13 14.95 0.851 0.80 Financial instruments recognised at fair value are measured based on the published exchange price, insofar as the financial instruments are traded on an active market. The fair value of non-quoted 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. 1 Dividend proposal for fiscal 2020, subject to the resolution of the Annual General Meeting on 28 April 2021. (27) Reporting on financial instruments as they fall under the scope of IFRS 9. Exchange-traded products are measured using the published Financial instruments are divided into non-derivative and derivative. Non-derivative financial assets closing prices of the relevant exchange. Non-exchange traded products are measured on the basis of essentially include other non-current financial assets, accounts receivable, marketable securities and publicly available broker quotations or, if such quotations are not available, on generally accepted cash and cash equivalents. Financial instruments are recognised either at amortised cost or at fair valuation methods. In doing so, we draw on prices on active markets as much as possible. If such prices value, depending on their classification. Financial instruments are recognised in the following categories: are not available, company-specific planning estimates are used in the measurement process. These Derivative financial instruments are recognised at their fair values as of the balance-sheet date, insofar • Debt instruments measured at amortised cost: the contractual cash flows solely consist of interest in the course of price determination. Assumptions pertaining to the energy sector and economy are and principal on the outstanding capital: there is an intention to hold the financial instrument until made within the scope of a comprehensive process with the involvement of both in-house and external maturity. experts. estimates encompass all of the market factors which other market participants would take into account 161 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Measurement of the fair value of a group of financial assets and financial liabilities is conducted on the • Level 1: Measurement using (unadjusted) prices of identical financial instruments formed on active basis of the net risk exposure per business partner. markets, The following overview presents the classifications of financial instruments measured at fair value in but which can be observed for the financial instrument either directly (i.e. as price) or indirectly the fair value hierarchy prescribed by IFRS 13. The individual levels of the fair value hierarchy are (i.e. derived from prices), defined as follows: • Level 3: Measurement using factors which cannot be observed on the basis of market data. • Level 2: Measurement on the basis of input parameters which are not the prices from Level 1, Level 1 Level 2 Level 3 Fair value hierarchy € million Other financial assets1 Derivatives (assets) of which: used for hedging purposes Securities Assets held for sale Derivatives (liabilities) of which: used for hedging purposes Liabilities held for sale Total 2020 4,244 8,784 1,634 4,219 8,660 1,498 3,659 1,269 214 8,085 1,634 2,950 8,404 1,498 371 699 Total 2019 4,320 12,108 2,961 3,258 9 256 10,479 1,513 4 Level 1 Level 2 Level 3 3,853 1,829 171 11,443 2,961 1,429 1 9,902 1,513 296 665 8 577 4 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 162 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Due to the higher number of price quotations on active markets, financial assets with a fair value €25 million) were reclassified from Level 1 to Level 2. Furthermore, in the previous year, derivatives with of €43 million (previous year: €24 million) were reclassified from Level 2 to Level 1. Conversely, due to a fair value of €44 million were reclassified from Level 2 to Level 3. a drop in the number of price quotations, financial assets with a fair value of €93 million (previous year: The development of the fair values of Level 3 financial instruments is presented in the following table: Level 3 financial instruments: Development in 2020 € million Other financial assets Derivatives (assets) Assets held for sale Derivatives (liabilities) Liabilities held for sale Level 3 financial instruments: Development in 2019 € million Other financial assets1 Derivatives (assets) Assets held for sale Derivatives (liabilities) Liabilities held for sale Balance at 1 Jan 2020 Changes in the scope of consolidation, currency adjustments and other 296 665 8 577 4 9 −9 −9 −8 −5 Balance at 1 Jan 2019 Changes in the scope of consolidation, currency adjustments and other 148 156 804 35 101 182 −819 138 Changes Recognised in OCI 98 Changes Recognised in OCI −9 Recognised in profit or loss −85 42 −313 Recognised in profit or loss −23 434 −8 432 With a cash effect 53 1 1 1 With a cash effect 79 −107 31 −28 4 Balance at 31 Dec 2020 371 699 256 Balance at 31 Dec 2019 296 665 8 577 4 1 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. 163 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 loss1 € million Other operating income / expenses Income from investments 1 Prior-year figures restated. Level 3 derivative financial instruments essentially consist of energy purchase and commodity agreements, which relate to trading periods for which there are no active markets yet. The valuation of such depends on the development of electricity, oil and gas prices in particular. All other things being equal, rising market prices cause the fair values to increase, whereas declining gas prices cause them to drop. A change in pricing by + / – 10 % would cause the market value to rise by €95 million (previous year: €61 million) or decline by €95 million (previous year: €61 million). Total 2020 Of which: attributable to financial instruments held at the balance-sheet date 356 −86 270 852 −85 767 Total 2019 12 −34 −22 Of which: attributable to financial instruments held at the balance-sheet date 12 −20 −8 164 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Financial assets and liabilities can be broken down into the measurement categories with the following The carrying amounts of financial assets and liabilities within the scope of IFRS 7 basically correspond to carrying amounts according to IFRS 9 in the year under review: their fair values. The only deviations are for financial liabilities. The carrying amount of these is Carrying amounts by category € million 31 Dec 2020 31 Dec 2019 €4,011 million (previous year: €4,632 million), while the fair value amounts to €4,281 million (previous year: €4,798 million). Of this, €607 million (previous year: €1,180 million) is related to Level 1 and €3,674 million (previous year: €3,618 million) to Level 2 of the fair value hierarchy. Financial assets measured at fair value through profit or loss 10,573 10,775 of which: obligatorily measured at fair value – continuing operations 10,573 10,767 The following net results from financial instruments as per IFRS 7 were recognised on the income 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 Equity instruments measured at fair value through other comprehensive income 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 13,366 2 8 9,543 112 1,338 1,727 3,702 7,163 7,163 7,013 315 4,247 8,970 8,966 4 7,950 311 statement, depending on the category: 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 Financial liabilities measured at (amortised) cost 2020 2019 3,318 3,318 −248 −7 193 −303 941 941 137 38 27 −317 165 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The net result as per IFRS 7 essentially includes interest, dividends and results from the measurement of In the 2020 fiscal year, €193 million (previous year: €27 million) in income from dividends from these financial instruments at fair value. financial instruments was recognised, of which €5 million (previous year: €5 million) is attributable to equity instruments sold during the same year. More over, in the year under review, equity instruments The option to recognise changes in fair value in OCI is exercised for a portion of the investments in equity measured through other comprehensive income were sold in line with the existing investment strategy. instruments. These are strategic investments and other long-term investments as well as securities in Their fair value at the derecognition date amounted to €782 million (previous year: €738 million). special funds. The resulting loss amounted to €18 million (previous year: gain of €5 million). Fair value of equity instruments measured at fair value through other comprehensive income € million Securities in special funds Nordsee One GmbH E.ON SE 31 Dec 2020 31 Dec 2019 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 The following is an overview of the financial assets and financial liabilities which are netted out in 120 3,582 due on a daily basis. 444 22 3,780 Netting of financial assets and financial liabilities as of 31 Dec 2020 Gross amounts recognised Netting Net amounts recognised Related amounts not set off Net amount € million Derivatives (assets) Derivatives (liabilities) 10,111 8,024 Netting of financial assets and financial liabilities as of 31 Dec 2019 Gross amounts recognised € million Derivatives (assets) Derivatives (liabilities) 10,381 9,031 Financial instruments Cash collateral received / pledged 902 585 -267 -495 -310 407 8 Net amounts recognised 580 846 Related amounts not set off Net amount Financial instruments Cash collateral received / pledged -119 -318 -727 262 -9,209 -7,439 Netting -9,801 -8,185 166 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The related amounts not set off include cash collateral received and pledged for over-the-counter at Risk (VaR), amongst other things. In addition, for the management of interest rate risk, a Cash Flow at transactions as well as collateral pledged in advance for stock market transactions. Risk (CFaR) is determined. As an energy producer with international operations, the RWE Group is exposed to market, credit and Using the VaR method, RWE determines and monitors the maximum expected loss arising from chang- liquidity risks in its ordinary business activity. We limit these risks via systematic, groupwide risk manage- es in market prices with a specific level of probability during specific periods. Historical price volatility is ment. The range of action, responsibilities and controls are defined in binding internal directives. taken as a basis in the calculations. With the exception of the CFaR data, all VaR figures are based on a confidence interval of 95 % and a holding period of one day. For the CFaR, a confidence interval of 95 % Market risks stem from changes in exchange rates and share prices as well as interest rates and and a holding period of one year is taken as a basis. commodity prices, which can have an influence on business results. Due to the RWE Group’s international profile, currency management is a key issue. Fuels are traded in Brit- es in interest rates can result in declines in the prices of securities from the holdings of RWE. This pertains ish pounds and US dollars as well as in other currencies. In addition, RWE does business in a number of primarily to fixed-rate instruments. A VaR is determined to quantify securities price risk. As of the balance- currency areas. The companies of the RWE Group are required to hedge their foreign currency risks via sheet date, it amounted to €2.5 million (previous year: €4.8 million). On the other hand, financing costs RWE AG. Foreign currency risks arising from the involvement in and the financing of the renewable ener- also increase along with the level of interest rates. The sensitivity of interest expenses to increases in gy business are hedged by RWE Renewables International Participations B.V. market interest rates is measured with the CFaR. As of 31 December 2020 this amounted to €18.6 mil- In respect of interest rate risks, RWE distinguishes between two risk categories: on the one hand, increas- lion (previous year: €34.8 million). RWE calculates the CFaR based on the assumption of the refinanc- Interest rate risks stem primarily from financial debt and the Group’s interest-bearing investments. We ing of maturing debt. hedge against negative changes in value caused by unexpected interest-rate movements using non-derivative and derivative financial instruments. As of 31 December 2020, the VaR for foreign currency positions was €0.2 million (previous year: €1.6 million). This corresponds to the figure used internally, which also includes the underlying trans- Opportunities and risks from changes in the values of non-current securities are centrally controlled by a actions for cash flow hedges. The VaR also reflects the risk of timing differences. professional fund management system operated by RWE AG. As of 31 December 2020, the VaR for risks related to the RWE share portfolio amounted to €0 million The Group’s other financial transactions are recorded using centralised risk management software and (previous year: €3.7 million). monitored by RWE AG. For commodity operations, risk management directives have been established by RWE AG’s Con- the trading business and the VaR for the pooled gas and liquefied natural gas (LNG) business. Here, the trolling & Risk Management Department. These regulations stipulate that derivatives may be used to maximum VaR is €40 million and €14 million, respectively. As of 31 December 2020, the VaR was hedge price risks. Furthermore, commodity derivatives may be traded, subject to limits. Compliance with €25.0 million in the trading business (previous year: €12.0 million) and €6.7 million for the pooled gas and limits is monitored daily. LNG business (previous year: €4.7 million). The key internal control parameters for commodity positions at RWE Supply & Trading are the VaR for Risks stemming from fluctuations in commodity prices and financial market risks (foreign currency risks, Additionally, stress tests are carried out on a monthly basis in relation to the trading and pooled LNG interest rate risks, securities risks) are monitored and managed by RWE using indicators such as the Value and gas business of RWE Supply & Trading to model the impact of commodity price changes on the 167 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information earnings conditions and take risk-mitigating measures if necessary. In these stress tests, market price All derivative financial instruments are recognised as assets or liabilities and are measured at fair value. curves are modified, and the commodity position is revalued on this basis. Historical scenarios of When interpreting their positive and negative fair values, it should be taken into account that, with the extreme prices and realistic, fictitious price scenarios are modelled. In the event that the stress tests exception of trading in commodities, these financial instruments are generally matched with underlying exceed internal thresholds, these scenarios are then analysed in detail in relation to their impact and transactions that carry offsetting risks. probability, and – if necessary – risk-mitigating measures are considered. Commodity risks of the Group’s power generation companies belonging to the Coal / Nuclear and in foreign functional currencies, commodity market price risks, interest risks from non-current liabilities Hydro / Biomass / Gas segments are hedged by the Supply & Trading segment on the basis of available and currency and price risks from sales and purchase transactions. market liquidity in accordance with Group guidelines. In accordance with the approach for long-term investments for example, it is not possible to manage commodity risks from long-term positions or positions which cannot be hedged due to their size and the prevailing market liquidity using the VaR 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 concept. As a result, these positions are not included in the VaR figures. Above and beyond open relation to the hedged risk) are recorded at fair value with an effect on income. production positions which have not yet been transferred, the Group companies belonging to the Coal / Nuclear and Hydro / Biomass / Gas segments are not allowed to maintain significant risk positions, RWE held the following instruments to hedge the fair value of commodity price risks: Hedge accounting pursuant to IFRS 9 is used primarily for mitigating currency risks from net investments according to a Group guideline. Furthermore, commodity price risks can exist in relation to the renewable generation positions and in the gas storage business. The commodity price risks associated with the renewable generation positions are managed by the Renewables Commodity Management Committee (RES CMC). The subsidiaries owning the gas storage facilities also manage their positions Fair value hedges as of 31 Dec 2020 independently, in compliance with unbundling regulations. One of our most important instruments to limit market risk is the conclusion of hedging transactions. The instruments most commonly used are forwards and options with foreign currency, interest rate swaps, interest rate currency swaps, and forwards, options, futures and swaps with commodities. CO2 derivatives Nominal volume (€ million) Secured average price (€ / metric ton) Maturity 1 – 6 months 7 – 12 months >12 months 39 5.57 Maturities of derivatives related to interest rates, currencies, equities, indices and commodities for the purpose of hedging are based on the maturities of the underlying transactions and are thus primarily Fair value hedges as of 31 Dec 2019 short term and medium term in nature. Hedges of the foreign currency risks of foreign investments have Maturity 1 – 6 months 7 – 12 months >12 months maturities of up to eleven years. CO2 derivatives Nominal volume (€ million) Secured average price (€ / metric ton) 39 5.57 168 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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, Cash flow hedges as of 31 Dec 2019 swaps and options with foreign currency and interest rates, and forwards, futures and swaps with commodities. Changes in the fair value of the hedging instruments – insofar as they affect the effective portion – are recorded in OCI 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 ineffectiveness. When Currency forwards – purchases Nominal volume (€ million) Avg. EUR / USD exchange rate hedging foreign currency risks, ineffectiveness can result from the difference in timing between the Avg. EUR / GBP exchange rate origination of the hedged item and the hedging instrument. Ineffectiveness can likewise stem from hedges containing material foreign currency basis spreads. Upon realisation of the underlying trans- action, the hedge’s contribution to income from accumulated other comprehensive income is recog- nised on the income statement or is offset against the initial value recognition of an asset or a liability. RWE held the following instruments to hedge future cash flows relating to foreign currency risks: Avg. EUR / CAD exchange rate Currency forwards – sales Nominal volume (€ million) Avg. EUR / USD exchange rate Avg. EUR / GBP exchange rate Avg. EUR / CAD exchange rate Maturity 1 – 6 months 7 – 12 months >12 months 2,276 1.15 0.87 1.54 -2,947 1.13 0.87 1.51 134 1.18 0.89 1.56 -401 1.18 0.88 61 1.19 1.64 -112 1.26 0.86 1.57 Cash flow hedges as of 31 Dec 2020 Currency forwards – purchases Nominal volume (€ million) Avg. EUR / USD exchange rate Avg. EUR / GBP exchange rate Avg. EUR / CAD exchange rate Currency forwards – sales Nominal volume (€ million) Avg. EUR / USD exchange rate Avg. EUR / GBP exchange rate Avg. EUR / CAD exchange rate Maturity 1 – 6 months 7 – 12 months >12 months RWE held the following instruments to hedge future cash flows relating to interest risks: 522 1.19 0.91 1.54 -945 1.20 0.90 1.55 258 1.19 0.91 1.63 -319 1.21 0.91 1.57 234 1.20 0.92 1.64 -447 1.20 0.91 Cash flow hedges as of 31 Dec 2020 Interest swaps Nominal volume (£ million) Secured average interest rate (%) Cash flow hedges as of 31 Dec 2019 Interest swaps Nominal volume (£ million) Secured average interest rate (%) 169 Maturity 1 – 6 months 7 – 12 months >12 months 1,215 1.55 Maturity 1 – 6 months 7 – 12 months >12 months 808 1.55 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 prices, Net investment hedges as of 31 Dec 2019 market liquidity and the sales business with consumers. Commodity prices are hedged if this leads to a positive margin. Proprietary commodities trading is strictly separated from this when managing risks. Hedges of net investment in a foreign operation are used to hedge the foreign currency risks of net investment in foreign entities whose functional currency is not the euro. We use interest rate currency swaps and other currency derivatives as hedging instruments. If there are changes in the fair value of interest rate currency swaps, this is recorded under foreign currency translation adjustments in OCI. Currency forwards – sales Nominal volume (€ million) Avg. EUR / GBP exchange rate RWE held the following instruments to hedge net investments in foreign operations: Maturity 1 – 6 months 7 – 12 months >12 months – 1,037 0.90 – 349 0.86 – 631 0.63 Net investment hedges as of 31 Dec 2020 Currency forwards – purchases Nominal volume (€ million) Avg. EUR / GBP exchange rate Currency forwards – sales Nominal volume (€ million) Avg. EUR / GBP exchange rate Maturity 1 – 6 months 7 – 12 months >12 months 277 0.90 – 5,737 0.91 – 631 0.63 170 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 2020 € million Fair value hedges Commodity price risks Cash Flow Hedges Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks Nominal amount 39 729 2,4441 Carrying amount Fair value changes in the current period Recognised ineffectiveness Assets Liabilities 192 177 1,104 366 56 -90 614 122 3,020 6 67 1 The net nominal amount stated is made up of purchases in the amount of €1,086 million and sales in the amount of –€3,530 million. Hedging instruments – effects on the net asset, financial and earnings position as of 31 Dec 2019 € million Fair value hedges Commodity price risks Cash Flow Hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks Nominal amount 39 931 296 -4,1251 Carrying amount Fair value changes in the current period Recognised ineffectiveness Assets Liabilities 52 2,337 135 105 87 1,046 328 11 69 26 -571 55 35 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. 171 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The carrying amounts of the hedging instruments are recognised in the ‘Other receivables and other assets’ and ‘Other liabilities’ balance- sheet items. Cash flow hedges and net investment hedges as of 31 Dec 2020 Changes in fair value during the current period Reserve for current hedges Reserve for terminated hedges The hedged items designated in hedging relationships had the following effects on the company’s net asset, financial and earnings position: Fair value hedges as of 31 Dec 2020 Carrying amount Of which: cumulative fair value adjustments Changes in fair value in the reporting year € million Assets Liabilities Assets Liabilities € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks 44 –78 –50 –59 –1,528 3,094 117 1,275 –14 –11 350 Commodity price risks Fair value hedges as of 31 Dec 2019 231 192 56 Carrying amount Of which: cumulative fair value adjustments Changes in fair value in the reporting year Cash flow hedges and net investment hedges as of 31 Dec 2019 Changes in fair value during the current period Reserve for current hedges Reserve for terminated hedges € million Assets Liabilities Assets Liabilities € million Commodity price risks 174 135 Cash flow hedges 11 Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks 67 623 – 94 107 4,574 55 1,151 – 15 328 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 underlying transactions are also recognised with an effect on income. The amounts realised from OCI are recognised in revenue and the cost of materials, 172 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information whereas any ineffectiveness is recognised in other operating income and expenses. Amounts recognised and any ineffectiveness of hedging interest risks are recognised in financial income and financial expenses on the income statement. The reconciliation of the changes in the hedge reserve in relation to the various risk categories of Hedge reserve 2019 € million Balance at 1 Jan 2019 Cash flow hedges hedge accounting follows below: Hedge reserve 2020 € million Balance at 1 Jan 2020 Cash flow hedges Effective portion of changes in market value Interest risks Foreign currency risks Commodity price risks 2,979 Gain or loss reclassified from OCI to the income statement – realisation of underlying transactions Effective portion of changes in market value –1,777 Foreign currency risks 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 Gain or loss recognised as a basis adjustment 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 2020 –35 37 Commodity price risks Gain or loss recognised as a basis adjustment –1,779 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 1,256 1,256 –982 1 –983 412 –147 –147 147 1,888 173 3,344 332 -53 -223 608 136 -127 263 -1,267 38 2 -1,307 434 95 95 -95 2,979 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information As part of the reform of the existing system for determining benchmark interest rates (the so-called Credit risks. In the fields of finance and commodities, RWE primarily has credit relationships with banks IBOR reform), the prevailing benchmark rates and methods for their determination are being replaced that have good creditworthiness and other trading partners, most of which have good creditworthiness. with alternative interest rates and methods. This is expected to occur by 31 December 2021 in the EU Furthermore, RWE has credit relationships primarily with banks and other business partners with good and the United Kingdom. However, at the time that these Notes were prepared the precise timing and creditworthiness within the scope of large-scale projects such as the construction of wind farms. RWE scope of the changes were not certain. reviews counterparty default risks before contracts are concluded. RWE mitigates such risks by establishing limits which are adjusted during the business relationships if the creditworthiness of the RWE is managing the transition to the new benchmark rates by way of an interdisciplinary working group business partners changes. Counterparty risks are monitored constantly so that countermeasures can headed by the Finance & Credit Risk Department. Its focus is on supplementing, amending and be initiated early on. Furthermore, RWE is exposed to credit risks due to the possibility of customers failing reassessing the relevant contracts and carrying out the technically necessary system adjustments. to meet their payment obligations. We identify these risks by conducting regular analyses of the With regard to the RWE Group, the IBOR reform impacts hedging relationships which serve to reduce the interest rate risks associated with non-current liabilities. These hedging relationships are based on the Due to the coronavirus crisis, the economic situation of many companies has deteriorated. This may 1-month GBP LIBOR and the 6-month GBP LIBOR. As of the balance-sheet date, they account for a have an impact on RWE's business partners, competitors and customers. Consequently, RWE is nominal volume von €1,366 million. Transition to the benchmark interest rates which will be replacing monitoring critical industries even more closely and exercising greater caution in conducting new the LIBOR is expected to occur by the end of 2021, prior to the end of the hedging relationships involved. transactions or extending existing ones. If necessary, previously approved limits are being lowered. creditworthiness of our customers and initiate countermeasures if necessary. RWE applied the amendments published in IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Amongst other things, RWE demands guarantees, cash collateral and other forms of security in order to Reform in September 2019 starting from 1 January 2020. The amendments provide temporary relief mitigate credit risks. Furthermore, RWE takes out credit insurance policies to protect against defaults. from applying specific hedge accounting requirements to hedging relationships directly affected by Bank guarantees received as collateral are from financial institutions with the required good ratings. IBOR reform. The reliefs primarily mean that the uncertainties arising from the IBOR reform do not result Collateral for credit insurance is pledged by insurers with an investment-grade rating. in discontinuation of the hedging relationships. Hedge ineffectiveness continues to be recognised in the profit or loss. The maximum balance-sheet default risk is derived from the carrying amounts of the financial assets stated on the balance sheet. The default risks for derivatives correspond to their positive fair values. Risks can also stem from financial guarantees and loan commitments which we have to fulfil vis-à-vis external creditors in the event of a default of a certain debtor. As of 31 December 2020, these 174 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information obligations amounted to €163 million (previous year: €174 million). As of 31 December 2020, default • Stage 3 – Lifetime expected credit losses (net): If in addition to the criteria for Stage 2 there is an risks were balanced against credit collateral, financial guarantees, bank guarantees and other objective indication of an impairment, the financial asset is assigned to Stage 3. The impairment is collaterals amounting to €3.6 billion (previous year: €5.5 billion). Of this, €0.8 billion relates to trade calculated analogously to Stage 2. In this case, however, the effective interest rate used for receivables (previous year: €1.1 billion), €0.6 billion to derivatives used for hedging purposes (previous measurement is applied to the carrying amount after impairment (net). year: €1.1 billion), and €2.2 billion to other derivatives (previous year: €3.3 billion). There were no material defaults in fiscal 2020 or the previous year. In the RWE Group, risk provisions are formed for financial instruments in the following categories: In the RWE Group, the risk provision for financial assets is determined on the basis of expected credit • debt instruments measured at amortised cost, losses. These are determined on the basis of the probability of default, loss given default and the • debt instruments measured at fair value through other comprehensive income. exposure at default. We determine the probability of default and loss given default using historical data and forward-looking information. The exposure at default date for financial assets is the gross carrying For debt instruments for which there has been no significant rise in credit risk since initial recognition, a amount on the balance-sheet date. The expected credit loss for financial assets determined on this risk provision is recognised in the amount of the expected 12-month credit losses (Stage 1). In addition, basis corresponds to the difference between the contractually agreed payments and the payments a financial instrument is assigned to Stage 1 of the impairment model if the absolute credit risk is low on expected by RWE, discounted by the original effective interest rate. The assignment to one of the levels the balance-sheet date. The credit risk is classified as low if the debtor’s internal or external rating is described below influences the level of the expected losses and the effective interest income recognised. investment-grade. For trade accounts receivable, the risk provision corresponds to the lifetime expected • Stage 1 – Expected 12-month credit losses: At initial recognition, financial assets are generally credit losses (Stage 2). assigned to this stage – with the exception of those that have been purchased or originated credit To determine whether a financial instrument is assigned to Stage 2 of the impairment model, it must be impaired, which are thus considered separately. The level of impairment results from the cash flows determined whether the credit risk has increased significantly since initial recognition. To make this expected for the entire term of the financial instrument, multiplied by the probability of a default assessment, we consider quantitative and qualitative information supported by our experience and within 12 months from the reporting date. The effective interest rate used for measurement is assumptions regarding future developments. In so doing, special importance is accorded to the sector determined on the basis of the carrying amount before impairment (gross). in which the RWE Group’s debtors are active. Our experience is based on studies and data from financial • Stage 2 – Lifetime expected credit losses (gross): If the credit risk has risen significantly between analysts and government authorities, amongst others. initial recognition and the reporting date, the financial instrument is assigned to this stage. Unlike Stage 1, default events expected beyond the 12-month period from the reporting date are also considered in calculating the impairment. The effective interest rate used for measurement is still determined on the basis of the carrying amount before impairment (gross). 175 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Special attention is paid to the following developments: A payment default and an associated assignment of the financial asset to Stage 3 is also assumed if • significant deterioration of the internal or external rating of the financial instrument, disproving the assumption of a payment default. Based on our experience, we generally assume that this the contractually agreed payments are more than 90 days overdue and there is no information • unfavourable changes in risk indicators, e. g. credit spreads or debtor-related credit default swaps, assumption does not apply to trade accounts receivable. • negative development of the debtor’s regulatory, technological or economic environment, • danger of an unfavourable development of business resulting in a significant reduction in A financial asset is depreciated if there are indications that the counterparty is in serious financial operating income. difficulty and the situation is unlikely to improve. We may also take legal recourse and other measures in order to enforce the contractually agreed payments in the event of an impairment. Independent thereof, a significant rise in credit risk and thus an assignment of the financial instrument to Stage 2 are assumed if the contractually agreed payments are more than 30 days overdue and there is no information that contradicts the assumption of a payment default. We draw conclusions about the potential default of a counterparty from information from internal credit risk management. If internal or external information indicates that the counterparty cannot fulfil its obligations, the associated receivables are classified as unrecoverable and assigned to Stage 3 of the impairment model. Examples of such information are: • The debtor of the receivable has apparent financial difficulties. • The debtor has already committed a breach of contract by missing or delaying payments. • Concessions already had to be made to the debtor. • An insolvency or another restructuring procedure is impending. • The market for the financial asset is no longer active. • A sale is only possible at a high discount, which reflects the debtor’s reduced creditworthiness. 176 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The following impairments were recognised for financial assets stated under the following balance-sheet items within the scope of IFRS 7: Impairment of financial assets € million Financial receivables Balance at 1 Jan 2020 Remeasurement due to new measurement parameters Transfer from Level 2 to Level 1 Balance at 31 Dec 2020 Impairment of financial assets € million Financial receivables Balance at 1 Jan 2019 Remeasurement due to new measurement 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 11 – 5 6 3 – 3 11 2 13 Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses 23 4 2 – 18 11 6 1 – 4 3 11 11 Total 25 – 5 – 1 19 Total 40 4 3 – 18 – 4 25 177 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information For trade accounts receivable, the expected credit loss is determined by applying the simplified approach taking account of the entire lifetime of the financial instruments. In the RWE Group, there are no cases where a risk provision for trade accounts receivable was not recognised due to the collateral on the books. The following tables show the development of the risk provisions for trade accounts receivable: Risk provision for trade accounts receivable € million Balance at 1 Jan 2020 Addition Changes in the scope of consolidation Balance at 31 Dec 2020 Risk provision for trade accounts receivable € million Balance at 1 Jan 2019 Addition Changes in the scope of consolidation Balance at 31 Dec 201 32 13 -3 42 27 9 -4 32 178 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 2020 € million Class 1 – 5: low risk Class 6 – 9: medium risk Class 10: high risk Class 11: doubtful Class 12: loss Gross carrying amounts of financial assets as of 31 Dec 2019 € million Class 1 – 5: low risk Class 6 – 9: medium risk Class 10: high risk Class 11: doubtful Class 12: loss Equivalent to S&P scale AAA to BBB– BB+ to BB– B+ to B– CCC to C D Equivalent to S&P scale AAA to BBB– BB+ to BB– B+ to B– CCC to C D Stage 2 – lifetime expected credit losses 42 Stage 1 – 12-month expected credit losses 11,600 59 19 11,678 42 Stage 3 – lifetime expected credit losses Trade accounts receivable 2,779 153 85 14 37 11 1 12 Total 14,421 223 104 14 38 3,068 14,800 Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses Trade accounts receivable Total 39 1 10 50 12 1 13 3,261 10,562 95 67 6 36 229 120 6 37 3,465 10,954 7,262 121 43 7,426 179 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Liquidity risks. As a rule, RWE Group companies refinance with RWE AG. In this regard, there is a risk RWE AG’s credit line was increased to €5 billion in April 2019. Its two tranches expire in April 2021 that liquidity reserves will prove to be insufficient to meet financial obligations in a timely manner. In (€2 billion) and April 2024 (€3 billion). The commercial paper programme was extended during the year 2021, liabilities owed to banks of €0.1 billion (previous year: €0.4 billion) are due. In addition, and now allows for issuance up to a maximum amount of €5 billion (previous year: US$5 billion). As in the short-term debt must be repaid. Above and beyond this, no other capital market debt matures in 2021 previous year, this programme was not used as of the balance-sheet date. Above and beyond this, (previous year: €0.5 billion, taking account of the earliest possible call date of the hybrid bond, which is RWE AG can finance itself using a €10 billion debt issuance programme; as of the balance- sheet date, classified as debt pursuant to IFRS). outstanding bonds from this programme amounted to €0 billion (previous year: €0 billion) at RWE AG. As of 31 December 2020, holdings of cash and cash equivalents and current marketable securities amounted to €8,993 million (previous year: €6,450 million). Financial liabilities falling under the scope of IFRS 7 are expected to result in the following (undiscounted) Accordingly, the RWE Group's medium- term liquidity risk can be classified as low. payments in the coming years: Redemption and interest payments on financial liabilities € million Bonds payable 1 Bank debt Lease liabilities Other financial liabilities Derivative financial liabilities Collateral for trading activities Miscellaneous other financial liabilities Carrying amounts 31 Dec 2020 549 1,611 1,187 1,135 8,661 716 2,687 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. Redemption payments Interest payments 2021 2022 to 2025 From 2026 2021 2022 to 2025 From 2026 282 140 263 324 201 82 267 1,385 957 476 605 2 27 26 22 50 20 110 44 91 149 78 22 9 404 472 151 85 86 350 7,857 716 2,645 180 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Redemption and interest payments on financial liabilities € million Bonds payable 1 Bank debt Lease liabilities Other financial liabilities 2 Derivative financial liabilities Collateral for trading activities Miscellaneous other financial liabilities Carrying amounts 31 Dec 2019 1,110 1,356 1,102 1,645 539 393 83 800 10,479 10,092 400 3,127 400 3,123 Redemption payments Interest payments 2020 2021 to 2024 From 2025 2020 2021 to 2024 From 2025 70 244 329 85 9 571 894 784 541 302 4 44 23 24 57 22 116 90 89 164 64 53 94 200 508 153 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. 2 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. Above and beyond this, as of 31 December 2020, there were financial guarantees for external creditors Gas purchases by the RWE Group are partially based on long-term take-or-pay contracts. The in the amount of €110 million (previous year: €121 million), which are to be allocated to the first year conditions in these contracts, which have terms up to 2036 in some cases, are renegotiated by the of repayment. Additionally, Group companies have provided loan commitments to third-party contractual partners at certain intervals, which may result in changes in the reported payment companies amounting to €53 million (previous year: €53 million), which are callable in 2021. obligations. Calculation of the payment obligations resulting from the purchase contracts is based on Detailed information on the risks of the RWE Group and on the objectives and procedures of the risk management is presented on page 69 et seqq. in the review of operations. Furthermore, RWE has long-term financial commitments for purchases of electricity. As of (28) Contingent liabilities and financial commitments contracts totalled €7.1 billion (previous year: €7.1 billion), of which €0.3 billion is due within one year As of 31 December 2020, the amount of capital commitments totalled €2,071 million (previous year: (previous year: €0.2 billion). Above and beyond this, there are also long-term purchase and service €1,989 million). This mainly consisted of investment in property, plant and equipment. contracts for uranium, conversion, enrichment and fabrication. 31 December 2020, the minimum payment obligations stemming from the major purchase parameters from the internal planning. We have made long-term contractual purchase commitments for supplies of fuels, including natural gas We bear legal and contractual liability from our membership in various associations which exist in in particular. Payment obligations stemming from the major long-term purchase contracts amounted connection with power plant projects, profit- and loss-pooling agreements and for the provision of to €23.6 billion as of 31 December 2020 (previous year: €27.1 billion), of which €0.3 billion is due within liability cover for nuclear risks, amongst others. one year (previous year: €0.3 billion). 181 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information On the basis of a mutual benefit agreement, RWE AG and other parent companies of German nuclear Activities with run-of-river, pumped storage, biomass, and gas-fired power plants are bundled in the power plant operators undertook to provide approximately €2,244 million in funding to liable nuclear Hydro / Biomass / Gas segment. It also contains the Dutch hard coal power stations Amer 9 and power plant operators to ensure that they are able to meet their payment obligations in the event of Eemshaven, which are increasingly co-firing biomass, and the company RWE Technology International, nuclear damages. From 1 January 2021 onwards, RWE AG has a 37.299 % contractual share in the which specialises in project management and engineering services. This segment is the responsibility of liability (30.452 % until 31 December 2020) plus 5 % for damage settlement costs. RWE Generation. The 37.9 % stake in the Austrian energy utility KELAG is also reported in the Hydro /  As part of the Group restructuring that occurred in fiscal 2016, a large portion of the pension commit- Biomass / Gas segment. ments which up to then had been reported at the holding level were transferred to former Group The Supply & Trading segment contains energy and commodities trading, the marketing and hedging of companies (former subsidiaries innogy SE, Essen, and affiliated companies) by cancelling the perfor- the RWE Group’s electricity position and the gas midstream business. This segment is the responsibility of mance obligation existing on an intra-group basis. The guarantees remaining vis-à-vis external parties RWE Supply & Trading, which also supplies certain major industrial and commercial customers with were cancelled. The Group is liable for the accrued claims of the active and former employees of these electricity and natural gas. Additionally, gas storage facilities in Germany and the Czech Republic also companies in the amount of €6,404 million. belong to this segment. RWE AG and its subsidiaries are involved in official, regulatory and antitrust proceedings, litigation and The Coal / Nuclear segment covers German electricity production using lignite, hard coal and nuclear arbitration proceedings related to their operations and are affected by the results of such. In some power, as well as lignite mining operations in the Rhineland. It also includes the investment in the Dutch cases, out-of-court claims are also filed. However, RWE does not expect any material negative power plant operator EPZ (30 %) and URANIT (50 %), which holds a 33 % stake in Urenco, a uranium repercussions from these proceedings on the RWE Group’s economic or financial position. enrichment specialist. The aforementioned activities and investments are the responsibility of the group companies RWE Power (lignite, nuclear) and RWE Generation (hard coal). (29) Segment reporting RWE is divided into five segments, which are separated from each other based on functional criteria. ‘Other, consolidation’ covers RWE AG, consolidation effects and the activities of other business areas which are not presented separately. These activities primarily include our non-controlling interests in the In the Offshore Wind segment, we report on our business in offshore wind, which is overseen by RWE German transmission system operator Amprion and in E.ON; the E.ON dividend is reported in the Renewables. The main production sites are located in the United Kingdom and Germany. In addition to financial result. electricity generation, activities in this field also include the development and realisation of projects to expand capacity. Onshore Wind / Solar encompasses our activities with onshore wind, solar power and battery storage. Here again, in addition to electricity generation, the focus is on expanding capacities. RWE Renewables has operating responsibility. Along with the USA, the main production sites are located in the United Kingdom, Germany, Italy, Spain, Poland and the Netherlands, as well as in Australia in the field of solar power. 182 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Segment reporting Divisions 2020 € million External revenue (incl. natural gas tax / electricity tax) Intra-group revenue Total revenue Adjusted EBIT Operating income from investments Operating income from investments 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 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal /  Nuclear Consoli- dation RWE Group 332 959 1,291 697 127 120 372 1,069 1,490 1,855 304 2,159 86 9 – 2 386 97 472 193 756 1,154 1,059 3,144 4,203 283 53 52 338 561 621 655 153 9,789 2,778 12,567 496 – 57 6 43 64 539 3 43 7 13,042 – 6,803 – 6,796 – 25 124 125 – 25 829 382 13,424 1,537 256 301 1,139 722 2,676 3,170 2,106 854 3,075 3,929 234 95 95 325 1,097 559 127 183 – 3,457 – 3,457 13,896 13,896 1,771 351 396 1,464 1,819 3,235 3,297 – 4 2,285 Regions 2020 € million External revenue 1, 2 Intangible assets and property, plant and equipment 1 Excluding natural gas tax / electricity tax. 2 Broken down by the region in which the service was provided. Germany 3,988 5,714 UK Rest of Europe North America 3,909 10,812 3,958 3,063 1,146 2,953 Other 687 273 RWE Group 13,688 22,815 183 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Segment reporting Divisions 2019 € million External revenue (incl. natural gas tax / electricity tax) Intra-group revenue Total revenue Adjusted EBIT Operating income from investments Operating income from investments 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 equipment1 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal /  Nuclear Consoli- dation RWE Group 85 682 767 377 32 19 237 272 614 1,622 492 1,265 271 1,536 59 11 13 236 83 295 230 752 1,202 3,409 4,611 342 53 51 330 772 672 720 212 9,689 3,267 12,956 691 1 34 40 88 7 12,248 – 6,901 – 6,894 – 128 132 728 12,976 1,341 229 131 248 – 1 1 842 1,216 2,183 731 – 129 3 29 639 3,214 – 3 1,482 1,029 2,385 3,414 – 74 76 75 380 785 306 68 281 – 3,113 – 3,113 – 1 4 13,277 13,277 1,267 305 323 1,222 2,001 2,489 3,281 1,767 1 Prior-year figures restated; only cash-effective investments are shown. Regions 2019 € million External revenue 1, 2, 3 Intangible assets and property, plant and equipment Germany 4,840 6,457 UK Rest of Europe North America 5,035 10,192 2,852 3,363 92 3,500 Other 306 281 RWE Group 13,125 23,793 1 Revised presentation due to the UK exiting the EU; prior-year figures were restated accordingly. 2 Excluding natural gas tax / electricity tax. 3 Broken down by the region in which the service was provided. 184 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information External revenue by product in 2020 Offshore Wind Onshore Wind / Solar Hydro /  Biomass / Gas Supply & Trading Other Core business Coal / Nuclear RWE Group € million External revenue1 of which: electricity of which: gas of which: other revenue 1 Excluding natural gas tax / electricity tax. . 332 332 1,855 1,676 179 1,056 684 5 367 9,597 8,775 529 293 9 1 8 12,849 11,468 534 847 External revenue by product in 2019 Offshore Wind Onshore Wind / Solar Hydro /  Biomass / Gas Supply & Trading Other Core business € million External revenue1, 2 of which: electricity of which: gas of which: other revenue 1 Excluding natural gas tax / electricity tax. 2 Some prior-year figures adjusted. 85 85 1,265 943 322 1,200 671 22 507 9,554 8,259 1,134 161 6 1 5 12,110 9,959 1,156 995 839 233 606 Coal /  Nuclear 1,015 291 724 13,688 11,701 534 1,453 RWE Group 13,125 10,250 1,156 1,719 185 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Notes on segment data. We report revenue between the segments as RWE intra-group revenue. Further commentary on the non-operating result can be found on page 55 et seq. of the review of Internal supply of goods and services is settled at arm’s length conditions. Adjusted EBITDA is used for operations. internal management. The following table presents the reconciliation of adjusted EBITDA to adjusted EBIT and income from continuing operations before tax: (30) Notes to the cash flow statement Reconciliation of income items € million Adjusted EBITDA 2020 2019 Cash and cash equivalents in the cash flow statement correspond to the amount stated on the balance The cash flow statement classifies cash flows according to operating, investing and financing activities. 3,235 2,489 marketable securities with a maturity of three months or less from the date of acquisition. sheet. Cash and cash equivalents consist of cash on hand, demand deposits and fixed-interest – Operating depreciation, amortisation and impairment losses −1,464 – 1,222 Adjusted EBIT + Non-operating result + Financial result Income from continuing operations before tax 1,771 1,267 Among other things, cash flows from operating activities include: −121 −454 1,196 – 1,081 – 938 – 752 • cash flows from interest and dividends of €281 million (previous year: €184 million) and cash flows used for interest expenses of €299 million (previous year: €257 million), • – €72 million (previous year:  €325 million) in taxes on income paid (less refunds), • income from investments, corrected for items without an effect on cash flows, in particular from Income and expenses that are unusual from an economic perspective, or stem from exceptional events, accounting using the equity method, which amounted to €323 million (previous year: €187 million). prejudice the assessment of operating activities. They are reclassified to the non-operating result. Amongst other things, these can include book gains or losses from the disposal of investments or Flows of funds from the acquisition and sale of consolidated companies are included in cash flows from non-current assets not required for operations, impairment of the goodwill of fully consolidated investing activities. Effects of foreign exchange rate changes and other changes in value are stated companies, as well as effects of the fair valuation of certain derivatives. separately. Non-operating result € million Disposal result Impact of the valuation of derivatives and inventories on earnings Other Non-operating result 2020 2019 Cash flows from financing activities of continuing operations include €492 million (previous year: 13 1,886 48 81 −2,020 – 1,210 −121 – 1,081 €430 million) which was distributed to RWE shareholders, €30 million (previous year: €51 million) which was distributed to non-controlling shareholders, and €0 million (previous year: €61 million) which was distributed to hybrid capital investors. Furthermore, cash flows from financing activities include purchases of €485 million (previous year: €86 million) and sales in the amount of €562 million (previous year: €0 million) of shares in subsidiaries and other business units which did not lead to a change of control. 186 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Changes in liabilities from financing activities are presented in the following table: Statement of changes in financial liabilities € million Current financial liabilities Non-current financial liabilities Other items Statement of changes in financial liabilities € million Current financial liabilities2 Non-current financial liabilities Other items 1 Jan 2020 Increase /  repayment 1,689 3,924 15 592 −546 1 Jan 20191 Increase /  repayment 787 2,330 986 218 474 Changes in the scope of consolidation 38 −289 Changes in the scope of consolidation 6,961 2,468 Currency effects Changes in fair values Other changes 31 Dec 2020 15 −183 −276 −234 −93 1,247 3,951 Currency effects Changes in fair values −392 17 137 Other changes −6,790 −1,109 31 Dec 2019 1,689 3,924 1 Including the effect of the initial adoption of IFRS 16 in the amount of €353 million. 2 Figures restated due to retroactive adjustments to the first-time consolidation of the acquired E.ON operations; see page 109 in the Notes. The amount stated in the ‘Other items’ line item contains cash- effective changes resulting from derivative financial instruments and margin payments, which are recognised in cash flows from financing activities in the cash flow statement. Restrictions on the disposal of cash and cash equivalents amounted to €45 million (previous year: €51 million). 187 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (31) Related party disclosures The key items from transactions with associates and joint ventures mainly stem from supply and service Within the framework of their ordinary business activities, RWE AG and its subsidiaries have business transactions. In addition to supply and service transactions, there are also financial links with joint relationships with numerous companies. These include associated companies and joint ventures, ventures. During the reporting period, income of €0 million (previous year: €2 million) was recorded from which are classified as related parties. In particular, this category includes material investments of the interest-bearing loans to joint ventures. As of the balance-sheet date, financial receivables accounted RWE Group, which are accounted for using the equity method. for €42 million of the receivables from joint ventures (previous year: €55 million). All transactions were Business transactions were concluded with major associates and joint ventures, resulting in the following from those with other enterprises. €124 million of the receivables (previous year: €108 million) and items in RWE’s consolidated financial statements: €162 million of the liabilities (previous year: €10 million) fall due within one year. Other obligations from completed at arm’s length conditions, i.e. on principle the conditions of these transactions did not differ Key items from transactions with associates and joint ventures € million Income Expenses Receivables Liabilities Associated companies Joint ventures executory contracts amounted to €112 million (previous year: €99 million). 2020 2019 320 187 119 134 258 142 88 123 2020 182 46 49 72 Above and beyond this, the RWE Group did not execute any material transactions with related 2019 companies or persons. 74 45 59 7 For fiscal 2020, the members of the Executive Board and Supervisory Board of RWE AG were deemed to be key management personnel for the RWE Group. In the previous year, until 18 September 2019, this also included the Executive Board and Supervisory Board members of innogy SE. The following information pertains to total compensation pursuant to IAS 24. Key management personnel (Executive and Supervisory Board members) received €8,357,000 in short-term compensation components for fiscal 2020 (previous year: €16,457,000 ). Additionally, share-based payments within the framework of LTIP SPP amounted to €4,731,000 (previous year: €8,386,000) and the pension service cost amounted to €595,000 (previous year: €554,000). Provisions totalling €32,959,000 (previous year: €29,351,000) were formed for obligations vis-à-vis key management personnel. 188 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The remuneration model and remuneration of the Executive and Supervisory Boards of RWE AG (32) Auditors‘ fees calculated pursuant to the German Commercial Code is presented in the remuneration report, which is The fees for audit services primarily contain the fees for the audit of the consolidated financial state- included in the review of operations. ments and for the audit of the financial statements of RWE AG and its subsidiaries, along with the review In total, the remuneration of the Executive Board amounted to €8,501,000 (previous year: €7,571,000). system, as well as expenses related to statutory or court-ordered requirements. In particular, the fees This contains share- based payments amounting to €2,934,000 (111,070 RWE performance shares) for tax services include compensation for consultation in the preparation of tax returns and other granted within the framework of the LTIP SPP. In the previous year, share-based payments amounting to national and international tax-related matters as well as review of resolutions of the tax authorities. €2,350,000 (123,037 RWE performance shares) were granted. Other services primarily include compensation for M&A activity and IT project consulting. of the interim statements. Other assurance services include fees for review of the internal controlling Including remuneration from subsidiaries for the exercise of mandates, the Supervisory Board received RWE recognised the following fees as expenses for the services rendered by the auditors of the total remuneration of €2,880,000 (previous year: €3,304,000) in fiscal 2020. The employee represent- consolidated financial statements, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft atives on the Supervisory Board have labour contracts with the respective Group companies. (PwC) and companies belonging to PwC’s international network: Remuneration occurs in accordance with the relevant contractual conditions. During the period under review, no loans or advances were granted to members of the Executive Board. PwC network fees 2020 Two employee representatives on the Supervisory Board had employee loans totalling €2,000. € million Former members of the Executive Board and their surviving dependants received €10,962,000 Audit services (previous year: €10,623,000), of which €671,000 came from subsidiaries (previous year: €651,000). Other assurance services As of the balance-sheet date, € 145,620,000 (previous year: €146,568,000) were accrued for defined benefit obligations to former members of the Executive Board and their surviving dependants. Of this, €6,925,000 was set aside at subsidiaries (previous year: €6,980,000). Tax services Other services Information on the members of the Executive and Supervisory Boards is presented on page 226 et seqq. of the Notes. Total 10.7 1.2 1.3 2.5 15.7 Of which: Germany 5.8 1.0 0.2 2.5 9.5 2019 Total Of which: Germany 17.5 12.9 2.5 0.9 5.8 2.3 0.3 5.6 26.7 21.1 189 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (33) Application of the exemption rule pursuant to Sec. 264, Para. 3 and Sec. 264b of the RWE successful in auction to acquire rights to use new wind power sites in UK North Sea German Commercial Code In February 2021, RWE secured two neighbouring locations in the UK North Sea by placing the winning In fiscal 2020, the following German subsidiaries made partial use of the exemption clause pursuant to bid in an auction for option rights to use new areas for offshore wind farms. This allows us to use the Sec. 264, Para. 3 and Sec. 264b of the German Commercial Code (HGB): areas to develop projects with a maximum volume of 3,000 MW. In exchange, we will pay an annual option fee of £82,552 / MW (plus inflation) until we make a final investment decision. First, the British • BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, Essen, Crown Estate will perform an environmental compatibility audit for the new sites. Given a positive result, • GBV Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen, we will start developing the project. As soon as the necessary permits have been obtained, we can • Kernkraftwerk Lingen Gesellschaft mit beschränkter Haftung, Lingen (Ems), participate in a subsidy auction for a contract for difference (CfD), after which we can make a final • KMG Kernbrennstoff-Management Gesellschaft mit beschränkter Haftung, Essen, investment decision. Then the option fee will be replaced by a much lower lease payment. If the project • Rheinbraun Brennstoff GmbH, Cologne, • Rheinische Baustoffwerke GmbH, Bergheim, progresses on schedule, the new wind farms could be commissioned towards the end of the decade. • RV Rheinbraun Handel und Dienstleistungen GmbH, Cologne, Considerable drop in earnings due to worst cold wave in Texas this century • RWE Nuclear Beteiligungs-GmbH, Essen, • RWE Technology International GmbH, Essen, • RWE Trading Services GmbH, Essen. In February 2021, an extraordinary cold front in parts of the USA curtailed energy supply substantially. Winter storms and icy rain forced some RWE wind farms to go offline for several days. We had sold forward a portion of the generation of these assets and therefore had to conduct short-term spot purchases in order to meet our supply obligations. Due to the tight supply situation and statutory price (34) Events after the balance-sheet date regulations, we had to pay up to US$9,000 / MWh for these electricity purchases. This curtailed earnings In the period from 1 January 2021 until the completion of the consolidated financial statements on in the Onshore Wind / Solar segment by a low to medium triple-digit million euro amount. 5 March 2021, the following significant events occurred: German government and nuclear power plant operators agree on compensation for Sale of 75 % of the shares of the onshore wind farms Stella, Cranell and East and West Raymond nuclear phaseout In January 2021, the sale of a total of 75 % of the shares in the three onshore wind farms Stella, Cranell In March 2021, the German government and the country’s nuclear power station operators reached an and East Raymond in Texas was completed. In this transaction, 51 % of the shares were sold to Algonquin agreement on the compensation due for the accelerated nuclear phaseout. The talks were initiated Power Fund (America) Inc., USA, a subsidiary of Algonquin Power & Utilities Corp., Canada and another because the German Constitutional Court declared the original statutory compensation regulations null 24 % of the shares to the UL investment firm Greencoat Capital. The underlying contracts were and void (see page 39). As regards RWE, this relates to unusable generation contingents of 25.9 million concluded in December 2020 and cover the sale of a total of 75 % of the shares in the onshore wind MWh and stranded investments of about €40 million. The government has indicated that it will pay farm West Raymond, which is expected to be completed in the second quarter of 2021. €33.22 / MWh as compensation for the electricity contingents. Furthermore, we should be reimbursed These wind farms are part of the Onshore Wind / Solar segment. Upon completion of the transaction in a public contract between the government and power plant operators. It also needs to be reviewed by January 2021, RWE deconsolidated the above wind farms and reports its remaining 25 % stake as an the European Commission for compliance with subsidy law. The agreement with the government did not investment accounted for using the equity method. RWE expects a profit in the medium to high affect the Group’s 2020 financial statements. for half of the stranded investments. We accept this solution. However, it is yet to be written into law and double-digit million euro range from this sale. 190 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (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, 5 March 2021 The Executive Board Schmitz Krebber Müller Seeger 1 www.rwe.com/en/statement-of-compliance-2020 191 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information 4.7 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 Para. 1) of HGB as of 31 December 2020 I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss 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 Avolta Storage Limited, Kilkenny/Ireland Belectric Australia Pty. Limited, Melbourne/Australia Belectric Canada Solar Inc., Vancouver/Canada 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 Solar & Battery GmbH, Kolitzheim Belectric Solar Ltd., Slough/United Kingdom 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 10,756 – 67,688 2,632 23,642 56,363 123,706 10,021 – 486 825 658 508 57 0 32 12,141 2,725 791 3,094 1,475 € ’000 – 14,889 – 2,359 164,990 662 0 1,727 2,443 – 194 2,148 668 – 45 611 – 28,139 – 13 544 151 160 – 7,070 144 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 192 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Direct Total BELECTRIC Solar Power, S.L., Barcelona/Spain BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, Essen 100 Bilbster Wind Farm Limited, Swindon/United Kingdom Blackjack Creek Wind Farm, LLC, Wilmington/USA Boiling Springs Holdco, LLC, Wilmington/USA 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 Class B Holdings LLC, Wilmington/USA Cassadaga Wind Holdings LLC, Wilmington/USA 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 193 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 13 201 3,906 0 0 11,205 62,905 € ’000 – 37 1 269 0 0 – 59 0 209,819 – 5,700 614 – 4,320 187,242 187,245 118,859 97,995 97,995 37 63,755 213,667 57,616 31,223 162 2,118 129 33 – 216 – 4 0 – 52 – 5,669 – 5,669 – 38 0 – 5,189 0 – 63 – 377 603 162 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss El Algodon Alto Wind Farm, LLC, Wilmington/USA 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., Geertruidenberg/Netherlands Energy Resources Ventures B.V., Geertruidenberg/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 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 Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen Generación Fotovoltaica De Alarcos, S.L.U., Barcelona/Spain GfV Gesellschaft für Vermögensverwaltung mbH, Dortmund 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct 100 100 Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 51 100 100 100 € ’000 0 25,696 33,138 € ’000 0 – 2,871 – 9712 113,117 18,708 29,022 21,299 75,081 75,081 7,098 7,806 10,828 17,823,771 76 16,825 – 68 13,681 0 – 4,988 – 4,988 1,700 1,928 2,339 1 – 92 133,844 – 1,437 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 194 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Direct Total 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 Hickory Park Solar, LLC, Wilmington/USA Inadale Wind Farm, LLC, Wilmington/USA innogy indeland Windpark Eschweiler GmbH & Co. KG, Eschweiler innogy Italia s.p.a., Milan/Italy Inversiones Belectric Chile LTDA, Santiago de Chile/Chile 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 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 195 100 100 51 100 100 100 100 100 100 51 100 100 100 74 100 100 100 100 100 100 59 100 € ’000 – 4,662 88,701 73,275 92,176 96,276 115,623 – 14 – 2,344 41,689 47,422 16,849 – 38 23,900 20,034 432,269 144,433 696,225 11,886 – 42,917 35,874 1,940,959 € ’000 – 4,712 0 4,750 0 – 35 20,662 2,274 – 2,508 – 1,133 3,359 1,083 – 7,158 3,6382 1 1 18,171 1 1,118 – 41,013 5,681 84,296 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Direct Total 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 Panther Creek Holdco, LLC, Wilmington/USA Panther Creek Wind Farm I&II, LLC, Wilmington/USA Panther Creek Wind Farm Three, LLC, Wilmington/USA Park Wiatrowy Dolice Sp. z o.o., Warsaw/Poland Park Wiatrowy Gaworzyce Sp. z o.o., Warsaw/Poland Peyton Creek Holdco, LLC, Wilmington/USA Peyton Creek Wind Farm, LLC, Wilmington/USA Piecki Sp. z o.o., Warsaw/Poland 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 196 51 100 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 77 € ’000 66,712 13,100 34,405 34,405 15,318 199,822 341,560 64,545 526 1,041 62,959 49,644 18,826 148,990 – 1,921 81,539 132,598 402,183 10,780 53,470 82,619 9,236 32,016 € ’000 7,996 0 – 1,192 – 1,192 7,231 0 – 1,545 – 3,506 2,950 1,195 0 – 620 2,531 4,829 – 533 – 2,076 0 15,266 0 0 1 1 1,757 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Rhenas Insurance Limited, Sliema/Malta 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 Battery Solutions GmbH, Essen RWE Bergheim Windparkbetriebsgesellschaft mbH, Hanover RWE Brise Windparkbetriebsgesellschaft mbH, Hanover RWE Canada Ltd., Saint John/Canada RWE Eemshaven Holding II B.V., Geetruidenberg/Netherlands RWE Energie Odnawialne Sp. z o.o., Szczecin/Poland RWE Energy Services, LLC, Wilmington/USA RWE Evendorf Windparkbetriebsgesellschaft mbH, Hanover RWE Gas Storage CZ, s.r.o., Prague/Czech Republic RWE Gas Storage West GmbH, Dortmund RWE Generation Holding B.V., Geertruidenberg/Netherlands RWE Generation Hydro GmbH, Essen RWE Generation NL B.V., Geertruidenberg/Netherlands RWE Generation NL Personeel B.V., Geertruidenberg/Netherlands RWE Generation SE, Essen RWE Generation UK Holdings Limited, Swindon/United Kingdom 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Total 100 50 100 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 59,547 132,198 147,030 147,030 36,694 164,540 7,825,951 25 25 226 € ’000 75 13,822 – 10,945 – 10,945 1 – 14,933 580,251 1 1 1 73,481 – 83 – 503,514 – 455,118 107,429 532 25 328,785 350,087 – 95,405 25 50,644 1,128 1 25,576 1 – 84,542 1 – 254,514 – 234,090 14,221 264,673 1,757 1 2,865,311 183,280 Direct 100 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 197 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Direct Total € ’000 € ’000 RWE Generation UK plc, Swindon/United Kingdom RWE Hörup Windparkbetriebsgesellschaft mbH, Hörup RWE Investco EPC Mgmt, LLC, Wilmington/USA RWE Investco Mgmt II, LLC, Wilmington/USA RWE Investco Mgmt, LLC, Wilmington/USA RWE Kaskasi GmbH, Hamburg RWE Kings Lynn Limited, Swindon/United Kingdom RWE Lengerich Windparkbetriebsgesellschaft mbH, Gersten RWE Limondale Sun Farm Holding Pty. Ltd., Melbourne/Australia RWE Lüneburger Heide Windparkbetriebsgesellschaft mbH, Walsrode RWE Magicat Holdco, LLC, Wilmington/USA RWE Markinch Limited, Swindon/United Kingdom RWE Mistral Windparkbetriebsgesellschaft mbH, Hanover RWE Nuclear Beteiligungs-GmbH, Essen RWE Nuclear GmbH, Essen RWE Offshore Wind Netherlands B.V., Geertruidenberg/Netherlands RWE Personeel B.V., Geertruidenberg/Netherlands RWE Power Aktiengesellschaft, Cologne and Essen RWE Renewables Americas, LLC, Wilmington/USA RWE Renewables Asset Management, LLC, Wilmington/USA RWE Renewables Australia Pty. Ltd., Melbourne/Australia RWE Renewables Benelux B.V., 's-Hertogenbosch/Netherlands RWE Renewables Beteiligungs GmbH, Dortmund 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 1,724,080 170,912 26 393,255 508,994 1 – 11,855 3,262 1,540,781 – 43,631 1,811 – 288 – 40,658 – 17,304 25 1 – 39,205 – 76,304 25 69,735 111,190 578 25 1 3,440 65,134 1 1 112,689 12,6891 49 – 9 2,042,043 – 572 8 4,8341 345,267 – 133,146 88,138 – 23 14,065 – 7 – 105,482 – 32,676 8,950 1,600 100 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 198 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss RWE Renewables Canada Holdings Inc., Vancouver/Canada RWE Renewables Development, LLC, Wilmington/USA RWE Renewables Energy Marketing Australia Pty. Ltd., Melbourne/Australia RWE Renewables Energy Marketing, LLC, Wilmington/USA RWE Renewables GmbH, Essen RWE Renewables GYM 2 Limited, Swindon/United Kingdom RWE Renewables GYM 3 Limited, Swindon/United Kingdom RWE Renewables GYM 4 Limited, Swindon/United Kingdom RWE Renewables HoldCo B.V., Geertruidenberg/Netherlands RWE Renewables Iberia, 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 RWE Renewables Iberia, S.A.U., Barcelona/Spain RWE Renewables International Participations B.V., Geertruidenberg/Netherlands RWE Renewables Ireland Limited, Kilkenny/Ireland RWE Renewables Italia S.r.l., Rome/Italy RWE Renewables Management UK Limited, Swindon/United Kingdom RWE Renewables O&M, LLC, Wilmington/USA RWE Renewables Poland Sp. z o.o., Warsaw/Poland RWE Renewables QSE, LLC, Wilmington/USA RWE Renewables Services, LLC, Wilmington/USA 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 100 100 100 100 100 100 100 100 100 99 95 100 60 100 100 100 100 100 100 100 100 100 € ’000 753 99,570 – 3 – 246,449 1,109 – 12,124 – 12,126 – 34,204 294,381 162,287 € ’000 – 644 – 15,657 – 3 – 9,097 1,0841 562 563 3,910 – 29 11,3222 – 114,300 – 114,300 – 5,891 494,451 138,042 – 3,308 248,891 – 13,528 106,527 – 2,654 30,662 – 1 13,014 19,748 530 – 53,859 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 199 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss 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 Holdings Limited, Swindon/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 Swindon Limited, Swindon/United Kingdom RWE Renewables UK Wind Limited, Coventry/United Kingdom RWE Renewables UK Zone Six Limited, Coventry/United Kingdom RWE Renouvelables France SAS, La Plaine St. Denis/France RWE Seabreeze II GmbH & Co. KG, Essen RWE Slovak Holding B.V., Geertruidenberg/Netherlands RWE Solar Development, LLC, Wilmington/USA RWE Solar NC Lessee LLC, Wilmington/USA RWE Solar NC Pledgor LLC, Wilmington/USA RWE Solar PV, LLC, Wilmington/USA RWE Sommerland Windparkbetriebsgesellschaft mbH, Sommerland RWE Süderdeich Windparkbetriebsgesellschaft mbH, Süderdeich 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 200 € ’000 55,143 570 69,331 1,744,746 162,529 73,526 111,477 54,472 37,431 72,962 68,527 2,274,519 25,282 0 79,136 46,397 704,084 45,224 13,647 13,708 € ’000 9,540 – 66 16,251 79,459 52,747 12,298 15,521 5,347 5,464 20,987 10,960 150,823 10,202 0 – 2 – 1,655 – 316 – 8,031 – 65 0 157,648 – 2,906 26 106 1 1 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss RWE Supply & Trading Asia-Pacific PTE. LTD., Singapore/Singapore RWE Supply & Trading CZ, a.s., Prague/Czech Republic RWE Supply & Trading GmbH, Essen 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 Titz Windparkbetriebsgesellschaft mbH, Essen RWE Trading Americas Inc., New York City/USA RWE Trading Services GmbH, Essen RWE Wind Karehamn AB, Malmö/Sweden RWE Wind Onshore Deutschland GmbH, Hanover RWE Wind Services Denmark A/S, Rødby/Denmark RWE Windpark Bedburg GmbH & Co. KG, Bedburg RWE Windpark Garzweiler GmbH & Co. KG, Essen RWE Windparks Deutschland GmbH, Essen RWE Windpower Netherlands B.V., 's-Hertogenbosch/Netherlands RWEST Middle East Holdings B.V., 's-Hertogenbosch/Netherlands Sand Bluff WF Holdco, LLC, Wilmington/USA Sand Bluff Wind Farm, LLC, Wilmington/USA Settlers Trail Wind Farm, LLC, Wilmington/USA Direct Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 51 100 100 100 100 100 100 € ’000 40,476 330,845 446,778 817 13,392 8,123 12,463 64 1,999 25 9,468 5,735 34,319 77,660 8,436 75,613 13,412 24 4,761 9,654 – 1,973 – 1,882 € ’000 10,476 79,983 1 107 10,087 – 1,101 1 1 325 1 768 1 – 187 1 5,692 510 – 84 1 3,602 33,559 – 8,828 – 8,697 162,819 – 11,820 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 201 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Sofia Offshore Wind Farm Holdings Limited, Swindon/United Kingdom Sofia Offshore Wind Farm Limited, Swindon/United Kingdom Solar Holding India GmbH, Kolitzheim Solar Holding Poland GmbH, Kolitzheim SOLARENGO Energia, Unipessoal, Lda., Cascais/Portugal 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, Raleigh/USA Tanager Holdings, LLC, Raleigh/USA Tech Park Solar, LLC, Wilmington/USA The Hollies Wind Farm Limited, Swindon/United Kingdom Triton Knoll HoldCo Limited, Swindon/United Kingdom Triton Knoll Offshore Wind Farm Limited, Swindon/United Kingdom Valencia Solar, LLC, Tucson/USA Vela Wind Holdco, LLC, Wilmington/USA West of the Pecos Holdco, LLC, Wilmington/USA 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 Direct Total 100 100 100 100 100 90 100 100 100 100 100 100 100 100 59 100 100 100 100 100 100 100 100 € ’000 0 – 389 5,926 16 – 151 17,194 83,308 € ’000 0 – 16 – 7 – 2 – 70 3,435 0 207,716 – 1,961 8,890 9,534 7,367 6,891 17,617 528 92,254 – 94,320 17,594 138,043 87,811 124,904 28,748 60,577 25,558 – 66 – 62 – 2 3 686 – 44 0 – 511 1,281 0 0 – 5,948 0 0 2,455 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 202 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss 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 € ’000 – 196 765 256 – 30 8,748 2,198 € ’000 – 194 245 1 30 – 588 182 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 203 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss 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., Genua/Italy Aktiebolaget Grundstenen 167184, Malmö/Sweden Alcamo II S.r.l., Milan/Italy Alvarado Solar S.L., Barcelona/Spain Ashwood Solar I, LLC, Wilmington/USA Auzoberri Desarrollo, S.L.U., Barasoain/Spain Azagra Energy Quel, S.L.U., Barasoain/Spain Baltic Trade and Invest Sp. z o.o., Slupsk/Poland Baron Winds II LLC, Chicago/USA 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 SP Solarprojekte 17 GmbH & Co. KG, Kolitzheim Belectric SP Solarprojekte 18 GmbH & Co. KG, Kolitzheim Belectric SP Solarprojekte 19 GmbH & Co. KG, Kolitzheim Belectric SP Solarprojekte 20 GmbH & Co. KG, Kolitzheim Benbrack Wind Farm Limited, Swindon/United Kingdom Big Star Solar, LLC, Wilmington/USA Blackbeard Solar, LLC, Wilmington/USA Blackbriar Battery, LLC, Wilmington/USA 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 872 207 25 15 0 2 1 322 16 3 – 11 – 11 0 – 232 – 383 9,309 – 5,135 0 0 159 53 – 24 – 136 0 0 0 0 0 – 496 – 2 – 19 – 42 3 3 3 3 3 0 0 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 204 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Blueberry Hills LLC, Chicago/USA BO Baltic Offshore GmbH, Hamburg Bowler Flats Energy Hub LLC, Chicago/USA Bright Arrow Solar, LLC, Wilmington/USA Buckeye Wind LLC, Chicago/USA Burgar Hill Wind Farm Limited, Swindon/United Kingdom Bursjöliden Vind AB, Malmö/Sweden Camaiore Sp. z o.o., Warsaw/Poland Camellia Solar LLC, Wilmington/USA Camellia Solar Member LLC, Wilmington/USA Cardinal Wind Farm, LLC, Wilmington/USA Carmagnola Sp. z o.o., Warsaw/Poland Casarano Sp. z o.o., Warsaw/Poland Casey Fork Solar, LLC, Wilmington/USA Cattleman Wind Farm II, LLC, Wilmington/USA Cattleman Wind Farm, LLC, Wilmington/USA Cecina Sp. z o.o., Warsaw/Poland Cercola Sp. z o.o., Warsaw/Poland Cerignola Sp. z o.o., Warsaw/Poland 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 205 Total 100 98 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 € ’000 0 9 0 0 0 0 585 0 0 0 0 0 0 0 – 4 14 28 0 – 4 0 0 0 0 0 3 0 0 0 3 3 0 0 0 3 3 3 0 0 – 10 – 1 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Climagy PV-Sonnenanlage GmbH & Co. KG, Kolitzheim Climagy PV-Sonnenanlage Verwaltungs-GmbH, Kolitzheim Climagy Sonnenkraft 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 Cordeneos Sp. z o.o., Warsaw/Poland Cordova Wind Farm, LLC, Wilmington/USA Cormano Sp. z o.o., Warsaw/Poland Cremona Sp. z o.o., Warsaw/Poland 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 Eko-En 5 Sp. z o.o., Warsaw/Poland El Navajo Solar, S.L., Barcelona/Spain Enchant Solar 3 Inc., Vancouver/Canada Enchant Solar 4 Inc., Vancouver/Canada Eólica de Sarnago, S.A., Soria/Spain 100 100 100 100 100 100 100 100 100 100 100 70 100 100 100 100 100 100 100 100 100 100 52 0 29 26 – 20 28 0 0 0 – 643 2,290 18,074 24 417 80 447 4 6 0 0 1,583 – 2 0 – 1 – 2 0 0 0 3 0 3 3 – 142 1,398 1,200 – 69 – 98 – 46 – 53 – 2 – 4 0 0 – 17 100 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 206 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 EverPower Maine LLC, Chicago/USA EverPower Ohio LLC, Chicago/USA EverPower Solar LLC, Chicago/USA EverPower Wind Development, LLC, Chicago/USA Extension Du Parc Eolien De L'Epine Marie Madeleine SAS, Paris/France Extension Du Parc Eolien Des Nouvions SAS, Paris/France Extension Du Parc Eolien Du Douiche SAS, Paris/France Farma Wiatrowa Rozdrazew sp. z o.o., Warsaw/Poland Fifth Standard Solar PV, LLC, Wilmington/USA Flatlands Wind Farm, LLC, Wilmington/USA Flexilis Power Limited, Kilkenny/Ireland 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 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 Generación Fotovoltaica Puerta del Sol, S.L.U., Murcia/Spain 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 1 29 9 – 632 0 0 0 0 0 41 12 25 25 30 25 25 100 36 3 0 0 0 0 – 28 – 2 – 3 – 136 0 0 – 1 0 0 – 24 – 24 1 1 1 1 1 1 – 29 0 100 100 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 207 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group 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 INDI Solar-Projects 1 B.V., Utrecht/Netherlands Infraestructuras de Aldehuelas, S.A., Barcelona/Spain Infrastrukturgesellschaft Netz Lübz mit beschränkter Haftung, Hanover Iron Horse Battery Storage, LLC, Wilmington/USA Jerez Fotovoltaica S.L., Barcelona/Spain Jugondo Desarrollo, S.L.U., Barasoain/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 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total € ’000 € ’000 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 51 51 100 100 100 100 100 0 0 0 0 37 163 0 0 – 13 7 428 18 9,689 16 1 0 2,899 31 0 0 0 155 12 0 0 0 0 1 – 76 0 0 – 60 – 31 0 – 24 – 306 – 23 – 1,186 0 700 0 0 0 0 – 61 – 6 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 208 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Lochelbank Wind Farm Limited, Swindon/United Kingdom Lorg Wind Farm Limited, Swindon/United Kingdom Mahanoy Mountain, LLC, Chicago/USA Major Wind Farm, LLC, Wilmington/USA March Road Solar, LLC, Wilmington/USA Maricopa East Solar PV 2, LLC, Wilmington/USA Maricopa East Solar PV, 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 Morska Farma Wiatrowa Antares sp. z o.o., Warsaw/Poland Mud Springs Wind Project LLC, Chicago/USA Muñegre Desarrollo, S.L.U., Barasoain/Spain Nordex Energy Judas, S.L.U., Barasoain/Spain Northern Orchard Solar PV 2, LLC, Wilmington/USA Northern Orchard Solar PV 3, LLC, Wilmington/USA Northern Orchard Solar PV, LLC, Wilmington/USA Nouvions Poste de Raccordement SAS, Paris/France 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 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 0 0 0 0 0 0 0 0 0 0 84 0 2 1 0 0 0 – 2 0 246 0 0 0 3 0 0 0 0 0 0 0 0 0 – 12 0 – 201 – 359 0 0 0 – 2 0 1 0 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 209 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 Oranje Wind Power C.V., 's-Hertogenbosch/Netherlands Orcoien Energy Orcoien, S.L.U., Barasoain/Spain Owen Prairie Wind Farm, LLC, Wilmington/USA Painter Energy Storage, LLC, Wilmington/USA Panther Creek Solar, LLC, Wilmington/USA Parc Eolien 101 SAS, Paris/France Parc Eolien 102 SAS, Paris/France Parc Eolien 103 SAS, Paris/France Parc Eolien 104 SAS, Paris/France Parc Eolien 105 SAS, Paris/France Parc Eolien 106 SAS, Paris/France Parc Eolien 107 SAS, Paris/France Parc Eolien 108 SAS, Paris/France Parc Eolien 109 SAS, Paris/France Parc Eolien 110 SAS, Paris/France Parc Eolien D'Allerey SAS, Paris/France Parc Eolien De Beg Ar C'hra SAS, Paris/France Parc Eolien De Canny SAS, Paris/France Parc Eolien De Catillon-Fumechon SAS, Paris/France Parc Eolien De Foissy-Sur-Vanne SAS, Paris/France Parc Eolien De Ganochaud SAS, Paris/France Parc Eolien De La Brie Nangissienne SAS, Paris/France Parc Eolien De La Butte Aux Chiens SAS, Paris/France 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 210 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 13 0 0 0 € ’000 0 – 215 0 0 0 3 3 3 3 3 3 3 3 3 3 – 23 – 48 28 35 28 35 23 27 29 – 2 – 2 – 2 – 2 – 3 – 2 – 2 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Parc Eolien De La Cabane Blanche SAS, Paris/France Parc Eolien De La Croix Blanche SAS, Paris/France Parc Eolien De La Jarrie-Audouin SAS, Paris/France Parc Eolien De La Plaine De Beaulieu SAS, Paris/France Parc Eolien De La Voie Corette SAS, Paris/France Parc Eolien De Langeron SAS, Paris/France Parc Eolien De L'Avre SAS, Paris/France Parc Eolien De Luçay-Le-Libre Et De Giroux SAS, Paris/France Parc Eolien De Martinpuich SAS, Paris/France Parc Eolien De Mesbrecourt-Richecourt SAS, Paris/France Parc Eolien De Nuisement Et Cheniers SAS, Paris/France Parc Eolien De Soudron SAS, Paris/France Parc Eolien De Villeneuve Minervois SAS, Paris/France Parc Eolien Des Ailes Du Gótinâis SAS, Paris/France Parc Eolien Des Grands Lazards SAS, Paris/France Parc Eolien Des Hauts-Bouleaux SAS, Paris/France Parc Eolien Des Nouvions SAS, Paris/France Parc Eolien Des Raisinières SAS, Paris/France Parc Eolien Du Balinot SAS, Paris/France Parc Eolien Du Ban Saint-Jean SAS, Paris/France Parc Eolien Du Bocage SAS, Paris/France Parc Eolien Du Catesis SAS, Paris/France Parc Eolien Du Champ Madame SAS, Paris/France 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 211 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 25 29 35 35 – 57 24 25 24 5 35 35 35 35 35 28 – 75 – 103 36 28 27 – 77 – 2 35 – 3 – 2 – 2 – 2 – 39 – 3 – 2 – 4 – 6 – 2 – 2 – 2 – 2 – 2 – 2 – 38 – 58 – 1 – 2 – 2 – 38 – 26 – 2 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Parc Eolien Du Chemin De Chálons SAS, Paris/France Parc Eolien Du Chemin De Saint-Gilles SAS, Paris/France Parc Eolien Du Chemin Vert SAS, Paris/France Parc Eolien Du Mirebalais SAS, Paris/France Parc Eolien Du Mont Hellet SAS, Paris/France Parc Eolien Du Mont Herbé SAS, Paris/France Parc Eolien Du Moulin De Thiau SAS, Paris/France Parc Eolien Du Moulin Du Bocage SAS, Paris/France Parc Eolien Du Plateau De La Chapelle-Surchésy SAS, Paris/France Parc Eolien Du Ru Garnier SAS, Paris/France Parc Eolien Les Pierrots SAS, Paris/France Parc Ynni Cymunedol Alwen Cyfyngedig, Swindon/United Kingdom Pawnee Spirit Wind Farm, LLC, Wilmington/USA Paz 'Éole SAS, Paris/France Pe Ell North LLC, Chicago/USA 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 PI E&P Holding Limited, George Town/Cayman Islands PI E&P US Holding LLC, New York City/USA Pinckard Solar LLC, Wilmington/USA 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 9 – 5 35 28 35 28 29 28 35 29 – 3 – 9 – 2 – 2 – 2 – 2 – 3 – 2 – 2 – 2 – 331 – 232 0 0 28 0 27 – 18 29 – 29 30 42,240 41,845 0 0 0 – 2 0 – 1 – 2 0 – 2 0 – 4 – 301 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 212 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Pinckard Solar Member LLC, Wilmington/USA Pinto Pass, LLC, Wilmington/USA Pipkin Ranch Wind Farm, LLC, Wilmington/USA 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 Quartz Solar, LLC, Wilmington/USA Quintana Fotovoltaica S.L.U., Barcelona/Spain RD Hanau GmbH, Hanau Ribaforada Energy Ribaforada, S.L.U., Barasoain/Spain Roadrunner Crossing Wind Farm, LLC, Wilmington/USA 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 Czech Gas Grid Holding B.V., Geertruidenberg/Netherlands RWE Dhabi Union Energy LLC, Abu Dhabi/UAE 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 49 0 0 0 27 38 25 26 26 0 246 8 0 1 0 0 0 688 37 1,419 0 0 33 0 0 0 – 4 – 27 – 5 – 4 – 4 0 – 9 3 – 4 0 – 213 0 0 0 67 – 12 – 32 0 1,526 0 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 213 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 RWE Eemshydrogen B.V., Geertruidenberg/Netherlands RWE Energy APAC Co. Ltd., Chengdu/China RWE Enerji Toptan Satis A.S., Istanbul/Turkey RWE Gas Storage Beteiligungsverwaltungs GmbH, Essen RWE Hillston Sun Farm Holding Pty. Ltd., Melbourne/Australia RWE indeland Windpark Eschweiler Verwaltungs GmbH, Eschweiler RWE Ingen!us Limited, Swindon/United Kingdom RWE NSW PTY LTD, Sydney/Australia RWE Offshore Wind A/S, Rødby/Denmark RWE Offshore Wind Holdings LLC, Dover/USA RWE Offshore Wind Netherlands Participations I B.V., Geertruidenberg/Netherlands RWE Offshore Wind Netherlands Participations II B.V., Geertruidenberg/Netherlands RWE Offshore Wind Netherlands Participations III B.V., Geertruidenberg/Netherlands RWE Offshore Wind Netherlands Participations IV B.V., Geertruidenberg/Netherlands RWE Pensionsfonds AG, Essen RWE Power Climate Protection GmbH, Essen RWE Principal Investments UK Limited, Swindon/United Kingdom 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 Denmark A/S, Rødby/Denmark RWE Renewables France SAS, Levallois-Perret/France RWE Renewables Japan G.K., Tokyo/Japan 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 1,798 3,243 10,989 – 231 54 2,537 77 277 0 0 0 0 3,872 23 103 2,324 – 219 1,095 4,483 – 172 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 214 € ’000 3 – 131 104 0 – 59 6 91 – 137 3 – 96 0 0 0 0 178 1 – 61 13,962 – 406 – 497 3 1,015 – 384 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 RWE Renewables Korea LLC, Seoul/South Korea 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 Renewables Taiwan Ltd., Taipei City/Taiwan RWE Seabreeze II Verwaltungs GmbH, Essen RWE Solar Netherlands B.V., 's-Hertogenbosch/Netherlands RWE Solar Poland Sp. z o.o., Warsaw/Poland RWE Stallingborough Limited, Swindon/United Kingdom RWE Supply & Trading Japan KK, Tokyo/Japan 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 Development AS, Oslo/Norway RWE Wind Holding A/S, Rødby/Denmark RWE Wind Norway AB, Malmö/Sweden 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 Transmission AB, Malmö/Sweden RWE Windpark Bedburg Verwaltungs GmbH, Bedburg 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 51 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 215 € ’000 3 – 157 – 6 – 3 3 6 0 1,014 25 – 3 71 0 – 144 – 168 0 – 2 894 25 94 1,310 3,328 4,228 5 – 82 2,165 1,427 715 48 0 0 161 1 0 34 – 17 3 – 2,313 1 – 184 – 1,022 – 8 3 2 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 RWE Windpark Garzweiler Verwaltungs GmbH, Essen RWE Windpark Papenhagen GmbH & Co. KG, Hanover RWE Windpark Papenhagen Verwaltungs GmbH, Hanover RWEST NA Investments GmbH, Essen RWEST PI Bras Limited, London/United Kingdom RWEST PI FRE Holding LLC, New York City/USA Santa Severa Centrale PV s.a.s. (s.r.l.), Rome/Italy SB Retrofit, LLC, Dallas/USA Scioto Solar LLC, Wilmington/USA Shay Solar, LLC, Wilmington/USA Snow Shoe Wind Farm, LLC, Wilmington/USA SP Solarprojekte 1 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 11 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 12 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 17 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 18 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 19 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 2 GmbH & Co. KG, Kolitzheim SP Solarprojekte 2 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 20 Verwaltungs-GmbH, Kolitzheim SP Solarprojekte 3 GmbH & Co. KG, Kolitzheim SP Solarprojekte 3 Verwaltungs-GmbH, Kolitzheim Sparta North, LLC, Wilmington/USA 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 216 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 27 576 33 40,522 22,135 2 – 152 0 0 0 24 29 29 – 5 26 – 6 26 0 € ’000 – 4 – 125 8 – 120 – 926 – 13 0 3 0 0 0 – 1 0 0 3 3 3 – 2 0 3 – 2 0 0 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 Sparta South, LLC, Wilmington/USA Stillwater Energy Storage, 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 Tafalla Energy Tafalla, S.L.U., Barasoain/Spain Terrapin Hills LLC, Chicago/USA Thor Wind Farm I/S, Rødby/Denmark 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 II, LLC, Wilmington/USA Vici Wind Farm III, LLC, Wilmington/USA Vici Wind Farm, LLC, Wilmington/USA Villarrobledo Desarrollo 2, S.L.U., Barasoain/Spain Vindkraftpark Aurvandil AB, Uppsala/Sweden 1 Profit and loss-pooling agreement; amounts blocked for transfer. 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 80 100 100 100 100 100 0 0 – 51 60 0 69 0 1 0 0 0 0 0 30 16,080 0 634 0 0 0 1 6 0 0 – 32 – 7 0 3 0 – 213 0 3 0 0 0 0 – 24 – 7,035 0 31 0 0 0 – 1,186 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 217 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information II. Affiliated companies which are not included in the consolidated financial statements due to secondary importance Shareholding in % Equity Net income / loss for the assets, liabilities, financial position and profit or loss of the Group Direct Total Vindkraftpark Brynhild AB, Uppsala/Sweden Vortex Energy Deutschland GmbH, Kassel Vortex Energy Windpark GmbH & Co. KG, Kassel West Fork Solar, LLC, Wilmington/USA Wildcat Wind Farm II, LLC, Wilmington/USA Wildcat Wind Farm III, LLC, Wilmington/USA Willowbrook Solar I, LLC, Wilmington/USA Windpark Bedburg A44n GmbH & Co. KG, Essen Windpark Bedburg A44n Verwaltungs GmbH, Essen Windpark Winterlingen-Alb GmbH & Co. KG, Kassel WIT Ranch Wind Farm, LLC, Wilmington/USA WR Graceland Solar, LLC, Wilmington/USA Zielone Glówczyce Sp. z o.o., Glówczyce/Poland III. Joint operations Greater Gabbard Offshore Winds Limited, Reading/United Kingdom N.V. Elektriciteits-Produktiemaatschappij Zuid-Nederland EPZ, Borssele/Netherlands 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 4 4,397 1,651 0 0 0 0 € ’000 0 – 265 – 1,029 0 0 0 0 3 3 2,501 – 2,606 0 0 419 0 0 – 527 Shareholding in % Equity Net income / loss Direct Total 50 30 € ’000 € ’000 1,062,256 100,186 81,302 5,609 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 218 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information IV. Affiliated companies of joint operations Enzee B.V., Borssele/Netherlands V. Associated companies of joint operations B.V. NEA, Arnhem/Netherlands Shareholding in % Equity Net income / loss Direct Total 100 € ’000 € ’000 3 Shareholding in % Equity Net income / loss Direct Total 28 € ’000 73,099 € ’000 1,385 VI. 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; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 514 50 27 50 25 50 50 754 604 40 50 50 € ’000 31,308 1,073,377 262,772 138,730 70,218 256,827 – 3,002 842 13,396 30,952 72,136 € ’000 1,489 139,732 16,589 – 94,126 48,653 – 9,497 – 1,023 128 3 3,6992 2,1762 98,103 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 219 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information VII. 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., Lissabon/Portugal Innogy Renewables Technology Fund I GmbH & Co. KG, 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 Schluchseewerk Aktiengesellschaft, Laufenburg Baden Vliegasunie B.V., De Bilt/Netherlands 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct 25 Total € ’000 € ’000 25 40 49 50 26 28 40 32 784 49 135 50 20 40 20 106 20 50 754 1,946,300 220,200 5,319 7,764 – 99 57,925 45,538 134,082 12,956 18,880 918,203 917,666 – 119 251,381 4,550 49,579 1,748,102 156,564 67,766 8,323 468 1,525 – 16 – 23,919 24,9602 6,647 1,692 670 111,5252 111,723 – 16 – 6,840 3,881 – 96,341 259,854 16,001 2,809 1,644 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 220 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information VIII. Companies which are not accounted for using the equity method due to secondary importance for the Shareholding in % Equity Net income / loss 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 Anemos Ala Segarra, S.L., Reus/Spain Ascent Energy LLC, Wilmington/USA Awel y Môr Offshore Wind Farm Limited, Swindon/United Kingdom 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 Dunkerque Eoliennes En Mer SAS, Montpellier/France EMDO S.A.S., Paris/France Eólica Alta Anoia, S.L., Reus/Spain Eólica La Conca, S.L., Reus/Spain Eólica La Conca 3, S.L., Reus/Spain Eoliennes en mer de Dunkerque (EMD) S.A.S., Paris/France Fassi Coal Pty. Ltd., Rutherford/Australia First River Energy LLC, Denver/USA Five Estuaries Offshore Wind Farm Limited, Swindon/United Kingdom Focal Energy Photovoltaic Holdings Limited, Nicosia/Cyprus Fond du Moulin SAS, Asnières sur Seine/France Gemeinschaftswerk Hattingen Gesellschaft mit beschränkter Haftung, Essen GfS Gesellschaft für Simulatorschulung mbH, Essen Direct Total 33 50 40 50 60 50 49 49 31 26 32 30 40 40 40 30 47 40 25 50 25 52 33 € ’000 453 5,113 83,373 5,106 – 2,127 15,199 861 119 10 € ’000 223 0 3 6,656 3 4,054 – 253 – 1,063 350 0 0 – 12,965 – 2,075 3 3 3 – 5 – 2,887 – 7,414 3 227 – 2 – 815 3 10 – 10,016 – 1,291 1,621 35 2,045 64 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 221 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information VIII. Companies which are not accounted for using the equity method due to secondary importance for the Shareholding in % Equity Net income / loss assets, liabilities, financial position and profit or loss of the Group 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 New England Aqua Ventus, LLC, Los Angeles/USA North Falls Offshore Wind Farm HoldCo Limited, Swindon/United Kingdom Parc Eolien De Sepmes SAS, Angers/France PV Projects Komplementär GmbH (i.L.), Kolitzheim Q-Portal GmbH, Grevenbroich Rampion Extension Development Limited, Swindon/United Kingdom Scarweather Sands Limited, Coventry/United Kingdom TetraSpar Demonstrator ApS, Copenhagen/Denmark Toledo PV A.E.I.E., Madrid/Spain TPG Wind Limited, Coventry/United Kingdom Umspannwerk Putlitz GmbH & Co. KG, Oldenburg Versorium Energy LP, Calgary, Alberta/Canada Walden Renewables Development LLC, New York City/USA Windesco Inc, Boston/USA 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct Total 50 33 50 50 47 28 30 51 25 50 50 50 50 49 50 50 33 33 50 25 50 76 21 € ’000 5,113 641 32 39 – 101 14,750 0 3,532 588 0 26 0 7,969 1,330 317 0 1,683 – 1,757 € ’000 0 26 – 1 0 74 0 0 – 6 – 39 3 0 3 – 1 3 3 0 – 2,124 723 726 – 109 3 – 1,045 – 871 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 222 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information VIII. Companies which are not accounted for using the equity method due to secondary importance for the Shareholding in % Equity Net income / loss assets, liabilities, financial position and profit or loss of the Group Direct Total € ’000 € ’000 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 50 50 50 50 38 1 1 1 1 966 – 572 – 410 – 847 – 939 – 308 IX. Other investments Shareholding in % Equity Net income / loss 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 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. Direct 36 Total 36 6 5 23 17 15 8 0 18 1 € ’000 121,538 14,906 68,311 5,368 595 € ’000 22,134 6,936 – 44,502 – 783 0 9,728,400 788,300 5,822 634 – 1,428 103,211 648 0 – 245 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 223 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information IX. Other investments HOCHTEMPERATUR-KERNKRAFTWERK Gesellschaft mit beschränkter Haftung (HKG) Gemeinsames Europäisches Unternehmen, Hamm 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 Promocion y Gestion Cáncer, S.L., Oviedo/Spain SET Fund II C.V., Amsterdam/Netherlands Stem Inc., Milbrae/USA 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 UMBO GmbH, Hamburg Umspannwerk Lübz GbR, Lübz Versorgungskasse Energie (VVaG) i.L., Hanover Versorium Energy Ltd., Calgary/Canada Shareholding in % Equity Net income / loss Direct Total € ’000 € ’000 29 12 43 31 15 15 15 29 10 10 10 12 10 6 6 48 5 17 43 10 18 0 15 0 0 94,283 50,169 72 70 158 73 2,386 312 17,942 92 22,570 – 20,413 22,287 1,955 390 1,025 4,413 27 51,729 – 2 – 2 – 190 – 1 0 0 785 – 1 – 2,915 – 51,014 6,884 165 122 – 33 2,925 8 0 3 1 Profit and loss-pooling agreement; amounts blocked for transfer. 2 Figures from the Group’s consolidated financial statements. 3 Newly founded, financial statements not yet available. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 224 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements List of shareholdings (part of the notes) 5 Further information Changes in shareholding with change of control Additions to affiliated companies included in the consolidated financial statements RWE Battery Solutions GmbH, Essen RWE Kings Lynn Limited, Swindon/United Kingdom RWE Renewables HoldCo B.V., Geertruidenberg/Netherlands RWE Renewables Management UK Limited, Swindon/United Kingdom RWE Renouvelables France SAS, La Plaine St. Denis/France Vela Wind Holdco, LLC, Wilmington/USA Disposal of affiliated companies included in the consolidated financial statements BELECTRIC PV Dach GmbH, Sömmerda Georgia Biomass Holding LLC, Savannah/USA Georgia Biomass LLC, Savannah/USA innogy Slovensko s.r.o., Bratislava/Slovakia Jurchen Technology GmbH, Kitzingen Jurchen Technology India Private Limited, Mumbai/India NRW Pellets GmbH, Erndtebrück Transpower Limited, Dublin/Ireland Východoslovenská distribucná, a.s., Košice/Slovakia Východoslovenská energetika a.s., Košice/Slovakia Východoslovenská energetika Holding a.s., Košice/Slovakia 1 Control by virtue of company contract. Shareholding in % 31 Dec 2020 Shareholding in % 31 Dec 2019 Change 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 491 100 100 100 100 100 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 49 Change 10 – 49 Changes in shareholding without change of control Affiliated companies which are included in the consolidated financial statements Nordsee Windpark Beteiligungs GmbH, Essen RWE Renewables UK Humber Wind Limited, Coventry/United Kingdom Shareholding in % 31 Dec 2020 Shareholding in % 31 Dec 2019 100 51 90 100 225 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information 4.8 Boards (part of the notes) As of: 5 March 2021 Supervisory Board (End of term: 2021 Annual General Meeting) Dr. Werner Brandt Bad Homburg Chairman Chairman of the Supervisory Board of ProSiebenSat.1 Media SE Year of birth: 1954 Member since 18 April 2013 Other appointments: • ProSiebenSat.1 Media SE (Chairman)1 • Siemens AG1 Frank Bsirske2 Isernhagen Deputy Chairman Former Chairman of ver.di - Vereinte Dienstleistungsgewerkschaft Year of birth: 1952 Member since 9 January 2001 Other appointments: • Deutsche Bank AG1 Michael Bochinsky2 Grevenbroich Deputy Chairman of the General Works Council of RWE Power AG Year of birth: 1967 Member since 1 August 2018 Sandra Bossemeyer2 Duisburg Chairwoman of the Works Council of RWE AG Representative of the disabled Year of birth: 1965 Member since 20 April 2016 Martin Bröker2 Bochum Head of Corporate IT & SAP at RWE AG Year of birth: 1966 Member since 1 September 2018 • 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. 226 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information Mag. Dr. h. c. Monika Kircher Krumpendorf, Austria Independent Corporate Consultant Year of birth: 1957 Member since 15 October 2016 Other appointments: - Andritz AG1 - Kärntner Energieholding Beteiligungs GmbH (Chairwoman) - KELAG-Kärntner Elektrizitäts AG - Siemens AG Österreich Harald Louis2 Jülich Chairman of the General Works Council of RWE Power AG Year of birth: 1967 Member since 20 April 2016 Other appointments: • RWE Power AG3 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 Heimbach 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 Other appointments: - NRW.Bank AöR Prof. Dr.-Ing. Dr.-Ing. E. h. Hans-Peter Keitel Essen Former Chairman of the Executive Board of HOCHTIEF AG Year of birth: 1947 Member since 18 April 2013 Other appointments: - 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. 227 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information 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 Peter Ottmann Nettetal Dr. Erhard Schipporeit Hanover Independent Corporate Consultant Year of birth: 1949 Member since 20 April 2016 Other appointments: • BDO AG Wirtschaftsprüfungsgesellschaft • Hannover Rück SE1 Managing Director of Verband der kommunalen RWE-Aktionäre GmbH • HDI Haftpflichtverband der Deutschen Industrie VVaG Attorney Former Chief Administrative Officer of Viersen County Year of birth: 1951 Member since 20 April 2016 Günther Schartz Wincheringen Chief Administrative Officer of the District of Trier-Saarburg Year of birth: 1962 Member since 20 April 2016 Other appointments: - A.R.T. Abfallberatungs- und Verwertungsgesellschaft mbH (Chairman) - Kreiskrankenhaus St. Franziskus Saarburg GmbH (Chairman) - Sparkassenverband Rheinland-Pfalz - Sparkasse Trier (Chairman) - Trierer Hafengesellschaft mbH - Zweckverband Abfallwirtschaft Region Trier • Talanx AG1 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 • 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. 228 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information Ullrich Sierau Dortmund Former Mayor of the City of Dortmund Year of birth: 1956 Member since 20 April 2011 Ralf Sikorski2 Hanover Deputy Chairman of IG Bergbau, Chemie, Energie Year of birth: 1961 Member since 1 July 2014 Other appointments: • CHEMIE Pensionsfonds AG • Lanxess AG1 • Lanxess Deutschland GmbH • RAG AG • RWE Generation SE3 • RWE Power AG3 - KSBG Kommunale Verwaltungsgesellschaft GmbH Marion Weckes2 Dormagen Head of the Listed Companies and Corporate Governance Unit of the Institute for Co-determination and Corporate Governance of the Hans Böckler Foundation 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 SE3 • 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. 229 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information Supervisory Board Committees Executive Committee of the Supervisory Board Dr. Werner Brandt (Chairman) Frank Bsirske Sandra Bossemeyer Anja Dubbert Matthias Dürbaum Prof. Dr. Hans-Peter Keitel Dagmar Mühlenfeld Dr. Wolfgang Schüssel Mediation Committee in accordance with Section 27, Paragraph 3 of the German Co-Determination Act 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 Audit Committee Dr. Erhard Schipporeit (Chairman) Michael Bochinsky Mag. Dr. h. c. Monika Kircher Ullrich Sierau Ralf Sikorski Marion Weckes Nomination Committee Dr. Werner Brandt (Chairman) Prof. Dr. Hans-Peter Keitel Peter Ottmann Strategy and Sustainability Committee Dr. Werner Brandt (Chairman) Frank Bsirske Prof. Dr. Hans-Peter Keitel Günther Schartz Ralf Sikorski Leonhard Zubrowski 230 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information The Executive Board Dr. Rolf Martin Schmitz (Chief Executive Officer until 30 April 2021) Dr. Markus Krebber (Chief Financial Officer until 30 April 2021) Chairman of the Executive Board of RWE AG since 15 October 2016 Chief Executive Officer as of 1 May 2021 Member of the Executive Board of RWE AG since 1 May 2009, appointed until 30 June 2021, Member of the Executive Board of RWE AG since 1 October 2016, appointed until 30 June 2026 will resign as of 30 April 2021 Labour Director of RWE AG from 1 May 2017 to 31 October 2020 Offices: Offices: • Corporate Transformation • Internal Audit  & Compliance • Corporate Communications & Energy Policy • Legal & Insurance • Corporate Business Development Other appointments: • E.ON SE1 • RWE Generation SE2 (Chairman) • RWE Renewables GmbH2 • RWE Supply & Trading GmbH2 • TÜV Rheinland AG - Jaeger Grund GmbH & Co. KG (Jaeger Gruppe, Chairman) - Kärntner Energieholding Beteiligungs GmbH - KELAG-Kärntner Elektrizitäts AG • Controlling & Risk Management • Investor Relations • Portfolio Management / Mergers & Acquisitions • Accounting • Corporate Strategy Other appointments: • RWE Generation SE2 • RWE Power AG2 • RWE Renewables GmbH2 (Chairman) • RWE Supply & Trading GmbH2 (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 Office within the Group. 231 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the notes) 5 Further information Dr. Michael Müller (Chief Financial Officer as of 1 May 2021) Zvezdana Seeger (Chief HR Officer) Member of the Executive Board of RWE AG since 1 November 2020, appointed until 31 October 2023 Member of the Executive Board of RWE AG since 1 November 2020, appointed until 31 October 2023 Managing Director and CFO of RWE Supply & Trading GmbH from 1 September 2016 to 30 April 2021 Labour Director of RWE AG since 1 November 2020 (posts held concurrently since 1 November 2020) Offices: • Business Services • Finance & Credit Risk • Tax Other appointments: • Amprion GmbH • RWE Generation SE2 • RWE Power AG2 Offices: • IT • Human Resources Other appointments: • RWE Pensionsfonds AG2 (Chairwoman) • RWE Power AG2 (Chairwoman) • 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 Office within the Group. 232 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information The following copy of the auditor‘s report also includes a “Report on the audit of the electronic renderings of the financial statements and the management report prepared for disclosure purposes in accordance with § 317 Abs. 3b HGB“ (“Separate report on ESEF conformity“). The subject matter (ESEF documents) to which the Separate report on ESEF conformity relates is not attached. The audited ESEF documents can be inspected in or retrieved from the Federal Gazette. 4.9 Independent auditor’s report To RWE Aktiengesellschaft, Essen Report on the audit of the consolidated financial statements and of the group management report • the accompanying group management report as a whole provides an appropriate view of the Group’s position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion on the group management report does not cover the content of those parts of the group management report listed in the “Other Audit Opinions Information” section of our auditor’s report. We have audited the consolidated financial statements of RWE Aktiengesellschaft, Essen, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reserva- December 31, 2020, and the consolidated statement of profit or loss, the consolidated statement of tions relating to the legal compliance of the consolidated financial statements and of the group comprehensive income, consolidated statement of changes in equity and consolidated statement of management report. cash flows for the financial year from January 1 to December 31, 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have Basis for the Audit Opinions audited the group management report of RWE Aktiengesellschaft, which is combined with the We conducted our audit of the consolidated financial statements and of the group management report Company’s management report, for the financial year from January 1 to December 31, 2020. In in accordance with § 317 HGB and the EU Audit Regulation (No. 537 / 2014, referred to subsequently as accordance with the German legal requirements, we have not audited the content of those parts of “EU Audit Regulation”) in compliance with German Generally Accepted Standards for Financial the group management report listed in the “Other Information” section of our auditor’s report. Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in In our opinion, on the basis of the knowledge obtained in the audit, compliance with the International Standards on Auditing (ISAs). Our responsibilities under those Germany] (IDW). We performed the audit of the consolidated financial statements in supplementary • the accompanying consolidated financial statements comply, in all material respects, with the IFRSs Audit of the Consolidated Financial Statements and of the Group Management Report” section of our as adopted by the EU, and the additional requirements of German commercial law pursuant to auditor’s report. We are independent of the group entities in accordance with the requirements of § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in European law and German commercial and professional law, and we have fulfilled our other German compliance with these requirements, give a true and fair view of the assets, liabilities, and financial professional responsibilities in accordance with these requirements. In addition, in accordance with position of the Group as at December 31, 2020, and of its financial performance for the financial Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit year from January 1 to December 31, 2020, and services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we requirements, principles and standards are further described in the “Auditor’s Responsibilities for the 233 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated the basis of fair value less costs of disposal. The impairment tests are performed at the level of the financial statements and on the group management report. cash-generating units or groups of cash-generating units to which the respective goodwill is allocated. The measurements to calculate the fair value less costs of disposal carried out for the Key Audit Matters in the Audit of the Consolidated Financial Statements purposes of the impairment tests are based on the present values of the future cash flows derived Key audit matters are those matters that, in our professional judgment, were of most significance in our from the planning projections for the next three years (medium-term plan) prepared by the executive audit of the consolidated financial statements for the financial year January 1 to December 31, 2020. directors and acknowledged by the supervisory board. In doing so, expectations relating to future These matters were addressed in the context of our audit of the consolidated financial statements as a market developments and country-specific assumptions about the performance of macroeconomic whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these indicators are also taken into account. Present values are calculated using discounted cash flow matters. models. The discount rate applied is the weighted average cost of capital for the relevant cash- generating unit. The impairment test did not result in the recognition of a write-down. The outcome In our view, the matters of most significance in our audit were as follows: of these measurements is dependent to a large extent on the estimates made by the executive Recoverability of goodwill Changes in Segment Reporting directors of the future cash inflows of the cash-generating units, and on the respective discount rates and rates of growth employed as well as on further assumptions. The measurement is therefore subject to considerable uncertainty. Against this background and due to the underlying Impairment of property, plant and equipment complexity of the measurement, this matter was of particular significance in the context of our audit. Our presentation of these key audit matters has been structured in each case as follows: As part of our audit, we evaluated the methodology used for the purpose of performing the Matter and issue Audit approach and findings Reference to further information impairment tests and assessed the calculation of the weighted average cost of capital, among other things. In addition, we assessed whether the future cash inflows underlying the measurements together with the weighted cost of capital used represent an appropriate basis for the impairment tests overall. We evaluated the appropriateness of the future cash inflows used in the calculations, among other things, by comparing this data with the Group’s medium-term plan and by reconciling Hereinafter we present the key audit matters: it against general and sector-specific market expectations. In this context, we also assessed whether Recoverability of goodwill the costs of Group functions were properly included in the respective cash-generating unit. In the knowledge that even relatively small changes in the discount rate applied can in some cases have a In the consolidated financial statements of RWE Aktiengesellschaft, goodwill amounting to material impact on the fair value less costs of disposal calculated using this method, we also €2.6 billion (4.2 % of consolidated total assets) (prior year: €2.5 billion or 4.0 % of consolidated total evaluated the parameters used to determine the discount rate applied and assessed the measure- assets) is reported under the balance sheet item “Intangible assets”. ment model. Furthermore, we evaluated the sensitivity analyses performed by the Company in order to evaluate any impairment risk (carrying amount higher than recoverable amount) in the event of a Goodwill is tested for impairment (“impairment test”) annually or when there are indications of reasonably possible change in a material assumption underlying the measurement. Overall, the impairment, to determine any possible need for write-downs. The carrying amounts of the relevant measurement parameters and assumptions used by the executive directors are in line with our cash-generating units, including goodwill, are compared with the corresponding recoverable expectations and are also within the ranges considered by us to be reasonable. amounts in the context of the impairment tests. The recoverable amount is generally calculated on 234 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information The Company’s disclosures relating to goodwill are contained in the notes to the consolidated Impairment of property, plant and equipment financial statements in section “Notes to the Balance Sheet” in note “(10) Intangible assets”. In the consolidated financial statements of RWE Aktiengesellschaft, power plants, refining plants Changes in segment reporting and opencast mining facilities (hereinafter referred to as “property, plant and equipment”) in the “Coal / Nuclear” and “Hydro / Biomass / Gas” segments are impaired by €1.6 billion due to adverse The executive directors of RWE Aktiengesellschaft made changes to its internal management and long-term assumptions concerning sales prices and volumes. The recoverability of property, plant reporting structures in financial year 2020. The separately reported activities “innogy continuing and equipment was tested on the basis of their fair values less costs to sell, which exceed their values operations” and “operations acquired from E.ON” have been dissolved and the power generation in use. The fair values of the respective property, plant and equipment are determined by the activities according to the energy source applied have been reclassified. A distinction is made Company as the present values of the future cash flows using discounted cash flow models. The between the five segments: (1) Offshore Wind, (2) Onshore Wind / Solar, (3) Hydro / Biomass / Gas, planning projections for the next three years (medium-term plan) prepared by the executive (4) Supply & Trading and (5) Coal / Nuclear, whereby the segments (1) to (4) form the core business. directors and acknowledged by the supervisory board are used as a basis and extrapolated on the This required a redefinition of the segments shown in the Group’s segment reporting and a reallocation of goodwill to the cash-generating units or groups of cash-generating units. The basis of long-term assumptions regarding electricity, coal, gas and CO2 certificate prices as well as the planned operating times. The outcome of these measurements is dependent to a large extent management approach required by IFRS 8 for the identification of segments and allocation of on the estimates made by the executive directors of the future cash inflows and on the respective goodwill involves the exercise of judgement to a high degree. The changes to segment reporting and discount rates and rates of growth employed as well as on further assumptions. The measurement is the reallocation of goodwill to the cash-generating units or groups of cash-generating units were therefore subject to considerable uncertainty, so that this matter was of particular significance in the therefore of particular significance in the context of our audit. context of our audit. As part of our audit, among other things, we assessed whether segment reporting in accordance As part of our audit, we evaluated the methodology used for the purpose of performing the with the requirements of the management approach is consistent with the Company’s internal impairment tests for property, plant and equipment and assessed the calculation of the weighted reporting and management structures. For this purpose, we evaluated in particular the internal average cost of capital, among other things. In addition, we assessed whether the future cash reporting to the executive board and satisfied ourselves by inspecting the minutes of executive inflows underlying the measurements together with the weighted cost of capital used represent an board meetings that the new segment structure corresponds to the Company’s regular internal appropriate basis for the impairment tests overall. We evaluated the appropriateness of the future reporting. Moreover, we reviewed the methodology used to reallocate goodwill and assessed the cash inflows used in the calculations, among other things, by comparing this data with the Group’s level of decision-making by the executive board concerning the allocation of resources. In addition, medium-term plan and by reconciling it against general and sector-specific market expectations we assessed the adjustments to the consolidation accounting entries required for the presentation of the new segments and the comparative disclosures. In our view, the redefinition of the reportable with regard to electricity, coal, gas and CO2 certificate prices as well as the planned operating times. Furthermore, on the basis of the medium-term plan, we assessed the recoverability of the property, segments and the reallocation of goodwill to the cash-generating units or groups of cash-generating plant and equipment based on the evidence presented to us. In the knowledge that even relatively units have been clearly documented and appropriately implemented overall. small changes in the discount rate applied can have a material impact on the fair values calculated The RWE Group’s segment reporting is contained in the notes to the consolidated financial and assessed the measurement model. Overall, the measurement parameters and assumptions statements in section “Other information” in note “(29) Segment reporting”. used by the executive directors are in line with our expectations and are also within the ranges using this method, we also evaluated the parameters used to determine the discount rate applied considered by us to be reasonable. 235 RWE Annual Report 2020 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information The Company’s disclosures relating to the recoverability of property, plant and equipment are Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated contained in the notes to the consolidated financial statements in section “Notes to the Income Financial Statements and the Group Management Report Statement” in note “(5) Depreciation, amortization and impairment losses”. The executive directors are responsible for the preparation of the consolidated financial statements that Other Information comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, The executive directors are responsible for the other information. The other information comprises the in compliance with these requirements, give a true and fair view of the assets, liabilities, financial following non-audited parts of the group management report: position, and financial performance of the Group. In addition, the executive directors are responsible for • the statement on corporate governance pursuant to § 289f HGB and § 315d HGB included in financial statements that are free from material misstatement, whether due to fraud or error. such internal control as they have determined necessary to enable the preparation of consolidated section 2.7 of the group management report • the separate non-financial group report pursuant to § 315b Abs. 3 HGB the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting The other information comprises further the remaining parts of the annual report – excluding cross- based on the going concern basis of accounting unless there is an intention to liquidate the Group or to references to external information – with the exception of the audited consolidated financial statements, cease operations, or there is no realistic alternative but to do so. In preparing the consolidated financial statements, the executive directors are responsible for assessing the audited group management report and our auditor’s report. Our audit opinions on the consolidated financial statements and on the group management report do report that, as a whole, provides an appropriate view of the Group’s position and is, in all material not cover the other information, and consequently we do not express an audit opinion or any other form respects, consistent with the consolidated financial statements, complies with German legal require- of assurance conclusion thereon. ments, and appropriately presents the opportunities and risks of future development. In addition, the Furthermore, the executive directors are responsible for the preparation of the group management executive directors are responsible for such arrangements and measures (systems) as they have In connection with our audit, our responsibility is to read the other information and, in so doing, to considered necessary to enable the preparation of a group management report that is in accordance consider whether the other information with the applicable German legal requirements, and to be able to provide sufficient appropriate • is materially inconsistent with the consolidated financial statements, with the group management report or our knowledge obtained in the audit, or The supervisory board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and of the group management report. evidence for the assertions in the group management report. • otherwise appears to be materially misstated. If, based on the work we have performed on the other information we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 236 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the • Evaluate the appropriateness of accounting policies used by the executive directors and the Group Management Report reasonableness of estimates made by the executive directors and related disclosures. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group • Conclude on the appropriateness of the executive directors’ use of the going concern basis of management report as a whole provides an appropriate view of the Group’s position and, in all material accounting and, based on the audit evidence obtained, whether a material uncertainty exists related respects, is consistent with the consolidated financial statements and the knowledge obtained in the to events or conditions that may cast significant doubt on the Group’s ability to continue as a going audit, complies with the German legal requirements and appropriately presents the opportunities and concern. If we conclude that a material uncertainty exists, we are required to draw attention in the risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the auditor’s report to the related disclosures in the consolidated financial statements and in the group consolidated financial statements and on the group management report. management report or, if such disclosures are inadequate, to modify our respective audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in However, future events or conditions may cause the Group to cease to be able to continue as a going accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally concern. Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) and supplementary compliance with the ISAs will always detect a material misstatement. • Evaluate the overall presentation, structure and content of the consolidated financial statements, Misstatements can arise from fraud or error and are considered material if, individually or in the including the disclosures, and whether the consolidated financial statements present the underlying aggregate, they could reasonably be expected to influence the economic decisions of users taken on transactions and events in a manner that the consolidated financial statements give a true and fair the basis of these consolidated financial statements and this group management report. view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law We exercise professional judgment and maintain professional skepticism throughout the audit. We also pursuant to § 315e Abs. 1 HGB. • Identify and assess the risks of material misstatement of the consolidated financial statements and of • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or the group management report, whether due to fraud or error, design and perform audit procedures business activities within the Group to express audit opinions on the consolidated financial statem- responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a ents and on the group management report. We are responsible for the direction, supervision and basis for our audit opinions. The risk of not detecting a material misstatement resulting from fraud is performance of the group audit. We remain solely responsible for our audit opinions. higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Evaluate the consistency of the group management report with the consolidated financial state- ments, its conformity with German law, and the view of the Group’s position it provides. • Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group • Perform audit procedures on the prospective information presented by the executive directors in the management report in order to design audit procedures that are appropriate in the circumstances, group management report. On the basis of sufficient appropriate audit evidence we evaluate, in but not for the purpose of expressing an audit opinion on the effectiveness of these systems. 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 assump- tions. We do not express a separate audit opinion on the prospective information and on the 237 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information assumptions used as a basis. There is a substantial unavoidable risk that future events will differ Other legal and regulatory requirements materially from the prospective information. We communicate with those charged with governance regarding, among other matters, the planned Consolidated Financial Statements and the Group Management Report Prepared for Publication Assurance Report in Accordance with § 317 Abs. 3b HGB on the Electronic Reproduction of the scope and timing of the audit and significant audit findings, including any significant deficiencies in Purposes internal control that we identify during our audit. Reasonable Assurance Conclusion We also provide those charged with governance with a statement that we have complied with the We have performed an assurance engagement in accordance with § 317 Abs. 3b HGB to obtain reason- relevant independence requirements and communicate with them all relationships and other matters able assurance about whether the reproduction of the consolidated financial statements and the group that may reasonably be thought to bear on our independence, and where applicable, the related management report (hereinafter the “ESEF documents”) contained in the attached electronic file safeguards. [RWE_AG_KA+KLB_ESEF-2020-12-31.zip] and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format (“ESEF From the matters communicated with those charged with governance, we determine those matters that format”). In accordance with German legal requirements, this assurance engagement only extends to were of most significance in the audit of the consolidated financial statements of the current period and the conversion of the information contained in the consolidated financial statements and the group are therefore the key audit matters. We describe these matters in our auditor’s report unless law or management report into the ESEF format and therefore relates neither to the information contained regulation precludes public disclosure about the matter. within this reproduction nor to any other information contained in the above-mentioned electronic file. In our opinion, the reproduction of the consolidated financial statements and the group management report contained in the above-mentioned attached electronic file and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format. We do not express any opinion on the information contained in this reproduction nor on any other information contained in the above-mentioned electronic file beyond this reasonable assurance conclusion and our audit opinion on the accompanying consolidated financial statements and the accompanying group management report for the financial year from January 1 to December 31,2020, contained in the “Report on the Audit of the Consolidated Financial Statements and on the Group Management Report” above. 238 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information Basis for the Reasonable Assurance Conclusion Group Auditor’s Responsibilities for the Assurance Engagement on the ESEF Documents We conducted our assurance engagement on the reproduction of the consolidated financial statements Our objective is to obtain reasonable assurance about whether the ESEF documents are free from and the group management report contained in the above-mentioned attached electronic file in material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error. accordance with § 317 Abs. 3b HGB and the Exposure Draft of IDW Assurance Standard: Assurance in We exercise professional judgment and maintain professional skepticism throughout the assurance Accordance with § 317 Abs. 3b HGB on the Electronic Reproduction of Financial Statements and engagement. We also: Management Reports Prepared for Publication Purposes (ED IDW AsS 410) and the International Standard on Assurance Engagements 3000 (Revised). Accordingly, our responsibilities are further • Identify and assess the risks of material non-compliance with the requirements of § 328 Abs. 1 HGB, described below in the “Group Auditor’s Responsibilities for the Assurance Engagement on the ESEF whether due to fraud or error, design and perform assurance procedures responsive to those risks, Documents” section. Our audit firm has applied the IDW Standard on Quality Management: Require- and obtain reasonable assurance that is sufficient and appropriate to provide a basis for our ments for Quality Management in the Audit Firm (IDW QS 1). assurance conclusion. Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents • Obtain an understanding of internal control relevant to the assurance engagement on the ESEF The executive directors of the Company are responsible for the preparation of the ESEF documents documents in order to design assurance procedures that are appropriate in the circumstances, but including the electronic reproduction of the consolidated financial statements and the group manage- not for the purpose of expressing an assurance conclusion on the effectiveness of these controls. ment report in accordance with § 328 Abs. 1 Satz 4 Nr. 1 HGB and for the tagging of the consolidated financial statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB. • Evaluate the technical validity of the ESEF documents, i. e., whether the electronic file containing the In addition, the executive directors of the Company are responsible for such internal control as they have applicable as at the balance sheet date on the technical specification for this electronic file. considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of § 328 Abs. 1 HGB for the electronic reporting format, whether • Evaluate whether the ESEF documents enables a XHTML reproduction with content equivalent to the due to fraud or error. audited consolidated financial statements and to the audited group management report. ESEF documents meets the requirements of the Delegated Regulation (EU) 2019 / 815 in the version The executive directors of the Company are also responsible for the submission of the ESEF documents • Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) enables an together with the auditor‘s report and the attached audited consolidated financial statements and appropriate and complete machine-readable XBRL copy of the XHTML reproduction. audited group management report as well as other documents to be published to the operator of the German Federal Gazette [Bundesanzeiger]. The supervisory board is responsible for overseeing the preparation of the ESEF documents as part of the financial reporting process. 239 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor by the annual general meeting on June 26, 2020. We were engaged by the supervisory board on July 8, 2020. We have been the group auditor of RWE Aktiengesellschaft, 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, March 5, 2021 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (sgd. Markus Dittmann) (sgd. Ralph Welter) Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor) 240 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Information on the auditor 5 Further information 4.10 Information on the auditor The consolidated financial statements of RWE AG and its subsidiaries for the 2020 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 for the last time is Mr. Ralph Welter. Mr. Welter has performed this function in seven previous audits of RWE. 241 RWE Annual Report 202005 Further information 5.1 Five-year overview 5.2 Imprint 5.3 Financial Calendar 243 244 245 Recultivation area near Erftstadt, Germany 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Five-year overview 5.1 Five-year overview Five-year overview of the RWE Group1 External revenue (excluding natural gas tax/electricity tax) Adjusted EBITDA Adjusted EBIT Income before tax Net income /RWE AG shareholders’ share in income Earnings per share Cash flows from operating activities of continuing operations Free cash flow Non-current assets Current assets Balance sheet equity Non-current liabilities Current liabilities Balance sheet total Equity ratio Net debt € million € million € million € million € million € € million € million € million € million € million € million € million € million % € million Workforce at the end of the year2 CO2 emissions million metric tons 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. 243 2020 13,688 3,235 1,771 1,196 995 1.56 4,125 1,132 34,461 27,207 17,971 27,280 16,417 61,668 29.1 4,432 19,498 68.9 2019 13,125 2,489 1,267 – 752 8,498 13.82 – 977 – 2,053 35,768 28,241 17,467 26,937 19,605 64,009 27.3 7,159 19,792 88.1 2018 13,406 1,538 619 49 335 0.54 4,611 3,439 18,595 61,513 14,257 20,007 45,844 80,108 17.8 19,339 17,748 118.0 2017 13,822 2,149 1,170 2,056 1,900 3.09 – 3,771 – 4,439 45,694 23,365 11,991 36,774 20,294 69,059 17.4 20,227 59,547 131.8 2016 43,590 5,403 3,082 – 5,807 – 5,710 – 9.29 2,352 809 45,911 30,491 7,990 39,646 28,766 76,402 10.5 22,709 58,652 148.3 RWE Annual Report 20201 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Imprint 5.2 Imprint RWE Aktiengesellschaft RWE Platz 1 45141 Essen Germany Phone +49 201 5179-0 Fax +49 201 5179-5299 E-mail contact@rwe.com Investor Relations Phone +49 201 5179-3112 Fax +49 201 5179-420042 Internet www.rwe.com/ir E-mail invest@rwe.com Corporate Communications Phone +49 201 5179-5009 Fax +49 201 5179-5290 Typesetting and production MPM Corporate Communication Solutions, Mainz www.mpm.de Photography André Laaks, Essen Translation Olu Taylor, Geretsried, Germany Proofreading Nicola Thackeray, Swindon, UK RWE is a member of DIRK – the German Investor Relations Association. For annual reports, interim reports, interim statements and further information on RWE, please visit us on the internet at www.rwe.com/en. This document was published on 16 March 2021. It is a translation of the German annual report. The consolidated financial statements and the review of operations are also published in the German Federal Gazette. These are the definitive versions. Forward-looking statements. This annual report contains forward-looking statements regarding the future development of the RWE Group and its companies as well as of the economic and political environment. These statements are assessments that we have made based on information available to us at the time this document was prepared. In the event that the underlying assumptions do not materialise or unforeseen risks arise, actual developments can deviate from the developments expected at present. Therefore, we cannot assume responsibility for the correctness of these statements. References to the internet. The contents of pages on the internet and publications to which we refer in the review of operations are not part of the review of operations and are merely intended to provide additional information. The corporate governance declaration in accordance with Section 289f as well as Section 315d of the German Commercial Code is an exception. 244 RWE Annual Report 2020Further information Financial Calendar 2021/2022 28 April 2021 29 April 2021 03 May 2021 12 May 2021 Virtual 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 15 March 2022 Annual report for fiscal 2021 28 April 2022 29 April 2022 03 May 2022 12 May 2022 Annual General Meeting Ex-dividend date Dividend payment Interim statement on the first quarter of 2022 11 August 2022 Interim report on the first half of 2022 10 November 2022 Interim statement on the first three quarters of 2022 The virtual Annual General Meeting 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. 

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