RWE AG
Annual Report 2021

Plain-text annual report

Focus on growth. Annual Report 2021 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 with natural gas, wind, sun and water. Tomorrow, we will make a full transition to zero-carbon energy sources. Because our objective is to be carbon neutral. And we aim to accomplish this by 2040. Green energy is the lifeblood of a sustainable economy. And demand for it is also rising 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 significant opportunities. Together with renowned partners from industry and science, we have set our sights on a hydrogen economy. We have already launched about 30 projects. Our long-term goal is to supply both green electricity and green hydrogen, a second product with huge potential demand. electrolysers for hydrogen production. In net terms, i. e. after deducting proceeds on the sale of stakes in projects, expenditure will total some 30 billion euros. Our objective here is to double generation capacity in our core business to 50 gigawatts. As we work to accomplish this, we will also make a socially acceptable exit from coal-fired generation. We want to do this as quickly as possible, while ensuring security of supply at all times. 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. RWE‘s 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: our carbon dioxide emissions from power production have more than halved since 2012. 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. It takes a major effort to achieve major goals. We plan to invest 50 billion euros in green growth in the current decade – in new wind and solar farms, battery storage, flexible backup power plants and 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 figures1 Power generation External revenue (excluding natural gas tax / electricity tax) Adjusted EBITDA Adjusted EBIT Income from continuing operations before tax Net income / income attributable to RWE AG shareholders Adjusted net income Cash flows from operating activities of continuing operations Capital expenditure Property, plant and equipment and intangible assets Financial assets Proportion of taxonomy-eligible investments3 Earnings per share Adjusted net income per share Dividend per share Net assets (+) / net debt (–) Workforce5 2021 2020 GWh 160,773 141,2042 24,526 13,688 € million € million € million € million € million € million € million € million € million € million % 3,650 2,185 1,522 721 1,569 7,274 3,769 3,689 80 88 3,286 1,823 1,265 1,051 1,257 4,125 3,358 2,285 1,073 – 1,132 € € € 1.07 2.32 0.904 1.65 1.97 0.85 31 Dec 2021 31 Dec 2020 € million 360 18,246 – 4,432 19,498 4,792 – 1,252 + / – 19,569 10,838 364 362 257 – 330 312 3,149 411 1,404 – 993 – 3,430 38,934 – 0.58 0.35 0.05 Free cash flow € million 4,562 Number of shares outstanding (annual average) thousands 676,220 637,286 1 Some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewables in the USA (see page 47). 2 Adjusted figure, as power purchases from generation assets in which RWE does not own the majority, but which we have long-term usage rights to, are no longer considered. 3 Taxonomy-eligible economic activity is activity which is subject to criteria under the EU Taxonomy Regulation – irrespective of whether the criteria are met (see page 34 et seq.). 4 Dividend proposal for fiscal 2021, subject to the passing of a resolution by the 28 April 2022 Annual General Meeting. 5 Converted to full-time positions. 3 RWE Annual Report 2021 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 Letter from the CEO 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 2.7 Commentary on reporting Business performance Financial position and net worth 2.8 Notes to the financial statements of RWE AG (holding company) 2.9 Outlook 2.10 Development of risks and opportunities 2.11 Disclosure relating to German takeover law 5 6 8 9 18 22 23 30 34 40 46 48 60 65 67 70 80 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 83 85 86 87 88 90 92 93 184 220 228 236 237 238 239 240 We provide detailed information on our sustainability activities in our Sustainability Report and Non-financial Report. These publications are available at www.rwe.com/responsibility- and-sustainability. The reports on fiscal 2021 will be published in April 2022. In accordance with Section 162 of the German Stock Corporation Act, we published the Remuneration Report for fiscal 2021 as a separate report for the first time. It has also been included in the invitation to the virtual Annual General Meeting, scheduled for 28 April 2022. The publications are available at www.rwe.com/remuneration and www.rwe.com/agm. 4 RWE Annual Report 2021 “Taking on and mastering new challenges is what RWE strives for – and so do I.” Feixia Li, Junior Project Manager Corporate Improvements & Projects, RWE Supply & Trading 1 To our investors 1.1 Letter from the CEO 1.2 Executive Board of RWE AG 1.3 Supervisory Board report 1.4 RWE on the capital market 6 8 9 18 1 To our investors Letter from the CEO 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Letter from the CEO 1.1 Letter from the CEO The conflict has massive ramifications for Europe as a whole. One key aspect is security of energy supply. As a company active in critical infrastructure, we at RWE are well aware of the great responsibility we bear at this time. We therefore support the efforts of the EU and the German government to reduce dependence on deliveries of commodities from Russia and simultaneously ensure a reliable supply of energy. We are working on identifying RWE power stations which can provide additional backup capacity. We are also playing our part in diversifying the supply of natural gas. One example of this is our participation in the planned LNG terminal in Brunsbüttel, Germany, which will be able to receive shipments of liquefied natural gas and, in the future, green ammonia for hydrogen production. Even though security of supply is the centre of attention at the moment, the medium- and long-term vision for energy policy remains unchanged. Indeed, expanding renewables and ramping up the hydrogen economy are more important than ever – not only to protect the climate, but also to increase our independence from commodity imports. RWE will make a major contribution to these causes. At our Capital Market Day on 15 November 2021, we informed the public of the action we plan to take. Our Growing Green strategy will make the Dr. Markus Krebber, Chief Executive Officer of RWE AG 2020s a decade of growth for our company. By 2030, we intend to invest a gross sum of Dear Shareholders, Ladies and Gentlemen around €50 billion in transforming RWE and thus transitioning to a sustainable energy system. These funds will be spent on the construction of wind and solar farms, battery storage, climate-friendly backup power stations and electrolysers for the production of hydrogen. Our net capital expenditure, which takes into account proceeds from the sale of stakes in projects, is expected to reach €30 billion. With this, we plan to double generation capacity in our core business to roughly 50 GW by the end of the decade. Earnings from Europe is experiencing particularly difficult times. The images we are seeing from Ukraine core activities will also increase sharply: for 2030, we project adjusted EBITDA in the order are shocking. For me, the scale of the human suffering caused by the war is almost of €5 billion, representing an increase of around 80 % compared to 2021. These goals are inconceivable. With the attack on Ukraine, Russia’s leadership has violated international law ambitious, but realistic. This was reflected in the stock market’s positive reaction to our and the right of the Ukrainian people to self-determination. Sadly, we have been reminded Growing Green strategy, as the RWE share closed trading that day with a strong gain and that democracy, freedom and peace cannot be taken for granted and that we must stand continued to perform well in the following weeks. up in support of them. Our thoughts and solidarity are with the people in Ukraine, who must endure the horrors of war. 6 RWE Annual Report 20211 To our investors Letter from the CEO 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information We are pursuing our growth strategy with determination. Since the start of 2021, we have In closing, let me briefly look ahead to fiscal 2022. Despite the uncertain course of the commissioned 14 wind and solar farms with a total capacity of 1.2 GW, despite supply chain conflict in Ukraine and its consequences, I am confident that we can continue to generate issues that led to delays for some projects. In the spring of 2021, we started building the good earnings as was the case in 2021. At present, our projection for adjusted EBITDA Sofia wind farm off the eastern coast of the UK, which will set new standards with its planned foresees a range of €3.6 billion to €4.0 billion. In this regard, one key factor will be the capacity of 1.4 GW. In addition, we set the stage for a number of attractive major projects. earnings contributions of our new wind and solar farms. As you can see, our growth strategy In auctions for new offshore wind farm sites in Great Britain, Germany, Denmark and the USA is paying off. That said, we are at the very beginning of a long and challenging journey. we secured leases for sites where we can build up to 8 GW of generation capacity. RWE’s transformation involves much more than billions of euros of investment. Passion, the ability to change, and, sometimes, courage are all key ingredients. I am convinced that RWE The past year was challenging in many respects, and thus we are even more pleased that we has all these qualities. And that means you, dear shareholders, can count on us. Thank you outperformed our financial targets. At €3,650 million, our adjusted EBITDA was well above for your trust and confidence! I hope you’ll continue with us on this exciting journey. the range we had projected. We met or exceeded the expectations in all of the segments. These achievements are driven by our dedicated employees, who have put their all into Sincerely yours, ensuring our company's continued success. I’d like to express my gratitude to all of them, on behalf of the entire Executive Board. Coming against the backdrop of the coronavirus pandemic, our performance in 2021 is all the more impressive. Thanks to the flexibility and dedication of our employees, we were able to maintain all of our critical operations at all times. The catastrophic flooding in western Germany was a defining moment in the summer of 2021. All of us can recall the scenes of utter devastation. Among the many people who lost their lives was an employee of one of RWE’s partner companies. We would like to extend our deepest condolences to his family and friends. The floods impacted a number of our sites. Nevertheless, we were able to limit the resulting downtime at the Inden opencast mine and many of our run-of-river power stations to just a few days. We have the untiring efforts of our people to thank for this. Many of them also rolled up their sleeves and personally helped out those in need. RWE itself provided materials, machinery and funds totalling around €2 million, with one quarter of the donations coming from our employees. 7 RWE Annual Report 20211 To our investors Executive Board of RWE AG 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information 1.2 Executive Board of RWE AG Markus Krebber, Chief Executive Officer, was born in 1973 in Kleve, Germany. He has held this position since May 2021. He trained as a banker and holds a doctorate in economics. Markus started his career in 2000 at McKinsey & Company. Thereafter, he held various managerial positions at Commerzbank AG. In November 2012, Markus joined the Board of Directors of RWE Supply & Trading GmbH, where he was responsible for finance and became CEO in March 2015. Markus joined the Executive Board of RWE AG in October 2016, where he was Chief Financial Officer until May 2021. Michael Müller has been Chief Financial Officer since May 2021. Born in 1971 in Cologne, Germany, he is an economist and holds a doctorate in mechanical engineering. After five years at McKinsey & Company, in mid-2005 he joined the RWE Group where he held managerial positions at RWE Power AG, RWE Generation SE and RWE AG. In September 2016, he became the Managing Director of RWE Supply & Trading GmbH in charge of finance. Michael has been a Member of the Executive Board of RWE AG since November 2020. Zvezdana Seeger was appointed Chief Human Resources Officer and Labour Director in November 2020. She was born in 1964 in Jajce, Bosnia and Herzegovina, holds a degree in economics and started her career in mechanical engineering. From 1995 to 2008, she worked for Deutsche Telekom AG, exiting as Managing Director of T-Systems Enterprise Service GmbH. In 2010, Zvezdana joined the Board of Directors of DHL Global Forwarding, Freight. In 2015, she was responsible for IT and operations on the Board of Management of Postbank AG. After Postbank was folded into DB Privat- und Firmenkundenbank AG, she sat on the Board of Management of the latter company. In addition, she was COO of the Private and Corporate Business Unit of Deutsche Bank AG. Zvezdana has been a Member of the Executive Board of RWE AG since November 2020. Michael Müller Markus Krebber Zvezdana Seeger 8 RWE Annual Report 2021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 “RWE's growth and climate protection strategy is both ambitious and credible. It justifies the trust investors place in our company.” Dr. Werner Brandt, Chairman of the Supervisory Board of RWE AG thus contributing to the success of the energy transition. After subtracting proceeds on the sale of stakes in projects, net investments will amount to some €30 billion. RWE will use these funds to build renewable generation assets, battery storage systems, flexible backup power stations and electrolysers for hydrogen production with a total capacity of 25 GW. Based on the criteria established by the EU Taxonomy Regulation, over 90 percent of the capital expenditure should contribute to environmental sustainability. Our growth campaign should drive the Group's adjusted EBITDA up to about €5 billion by 2030 although the non-core business with coal and nuclear power plants will have stopped contributing to earnings by then. Such a transformation is unrivalled in terms of speed, sustainability and returns. Every departure for new horizons involves bidding farewell to the past. RWE has set out to become carbon neutral along the entire value chain by 2040. The key to achieving this goal is the phaseout of electricity generation from coal, which in Germany goes hand in hand with an exit from nuclear energy. This is a Herculean task for RWE, both financially and socially. Last year, our company decommissioned its last two German hard coal-fired power plants, five lignite units and the Gundremmingen C nuclear power station. So this part of our transformation is also progressing at speed, as it should. However, we must not forget that the power plants guaranteed a reliable supply of electricity and that, first and foremost, we have the skilled and motivated staff on site to thank for that. Many of them dedicated their entire working life to the safe and profitable operation of the stations. To honour this loyalty, RWE will stand by its employees, ensuring that the personnel reduction is socially You might be familiar with the proverb 'A journey of a thousand miles begins with a single acceptable. Here, our focus rests in particular on the approximately 8,500 people working in step.' More often than not, this is true. But at RWE, the journey from a past dominated by the Rhenish lignite mining region. One can only consider a transformation successful if no fossil fuel to a carbon-neutral future began with a whole series of steps. Investors, media one is left behind. RWE is absolutely determined to rise to this challenge. representatives and the public bore witness to the speed at which the company seeks to continue this journey on 15 November 2021. That was the day on which management Last year was a momentous one, and sadly the second dominated by the coronavirus presented its ambitious growth strategy under the motto ‘Growing Green,’ which the pandemic. Fortunately, its effects on our company and staff remained manageable. RWE Supervisory Board had been heavily involved in developing. RWE aims to invest took extensive protective measures, thereby ensuring that our key personnel were able to approximately €50 billion in the company’s green transformation from 2021 to 2030, continue working almost without restrictions. Our company demonstrated yet again how 9 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information well it can navigate through crises. The Supervisory Board was also able to fulfil its duties Unfortunately, the beginning of this year is plagued by a horrifying event. The Russian without exceptions. Six of our seven meetings - the only exception being the session in invasion of Ukraine signals a turning point for the whole of Europe. I'm absolutely appalled September - and nearly all committee meetings were held virtually. The same applied to the at this act of aggression, which is a serious breach of international law. The war against Annual General Meeting (AGM) that took place on 28 April 2021. We benefited from the Ukraine demonstrates that peace and freedom are by no means a matter of course in experience gained at our first purely digital Annual General Meeting held in the preceding Europe and that we must take decisive action to preserve these ideals. We discussed the year. In addition, we reacted to the wishes expressed by our investors by introducing some political and economic consequences of the crisis in Ukraine at the Supervisory Board new services. For example, the speeches by the CEO and CFO as well as my report were meeting we held on 9 March 2022. If the situation escalates, we may face bottlenecks on published on the company's website before the AGM. Moreover, our shareholders had the Europe's energy markets, which would also affect RWE. However, after assessing the opportunity to submit questions and remarks in advance. We will have to hold a purely potential developments in depth, we currently believe that the risks to which the Group is virtual Annual General Meeting once again in 2022. We hope that you, our valued exposed are manageable. Our main concern is for the people in Ukraine for whom we feel shareholders, accept this decision in light of the continued exposure to risks arising from deeply during these difficult times. COVID-19. No AGM is worth risking one’s health. At RWE, our hearts went out to the many victims of the catastrophic floods in the summer in landmark both in terms of strategy and personnel. RWE AG has had a new CEO since 1 May the states of North Rhine-Westphalia and Rhineland-Palatinate. The floodwater claimed the 2021: Markus Krebber, our former CFO, who joined the Group in 2012. His predecessor, life of an employee of a partner company at the Inden opencast lignite mine. We would like Rolf Martin Schmitz, retired from the Executive Board on 30 April, 2021 after four-and-a- to express our deepest condolences to the family and friends of those who died in this tragic half years at the helm. Together with Markus, he initiated RWE’s transformation into a event. RWE was affected by the floods at several of its locations. Both Inden and nearly all leading renewable energy company. It is with great pleasure that I look back on the our run-of-river power plants in the region were forced to interrupt operations. However, the successful work we did with Rolf, but I also look forward to continuing this journey with stations and mines were able to resume operations after a few days. We have the huge Markus and his team. Zvezdana Seeger and Michael Müller joined the team in November dedication of our employees to thank for this. I was deeply touched by their commitment 2020. Zvezdana is our Chief HR Officer and Labour Director. Michael took over as CFO from Changes in personnel on the Executive and Supervisory Boards. The past year was a both on and off site and the way everyone pulled together throughout the entire Group. As Markus Krebber with effect from 1 May 2021. sad as the catastrophic floods were, they reminded us of the phenomenal people we have at RWE – a team on which we can rely and we can be proud of. The Supervisory Board also went through some personnel changes last year. On conclusion of the Annual General Meeting on 28 April 2021, the tenures of all the members of this corporate body expired. However, it was impossible for the ten employee representatives to be elected as the Assembly of Delegates, which is charged with this task, was not able to convene until 15 September owing to the restrictions imposed to combat COVID-19. Therefore, restaffing for the transitional period was implemented by court order. 10 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information The incumbent employee representatives were reappointed to the Supervisory Board by On 15 September 2021, the Assembly of Delegates finally elected the employee the Essen District Court. In alphabetical order, they were Michael Bochinsky, Sandra representatives to the Supervisory Board. This ended the tenure of the court-appointed Bossemeyer, Martin Bröker, Frank Bsirske, Anja Dubbert, Matthias Dürbaum, Harald Louis, members. Ralf Sikorski, Michael Bochinsky, Sandra Bossemeyer, Matthias Dürbaum, Harald Ralf Sikorski, Marion Weckes and Leonhard Zubrowski. Louis and Marion Weckes were re-elected. Martin Bröker, Frank Bsirske, Anja Dubbert and Leonhard Zubrowski retired from their offices. Reiner van Limbeck, Dagmar Paasch, Dirk By contrast, the election of the shareholder representatives was carried out as planned at Schumacher and Andreas Wagner replaced them as new members of the Supervisory the virtual Annual General Meeting on 28 April: Ute Gerbaulet, Hans-Peter Keitel, Monika Board. The terms of all employee representatives will end on conclusion of the 2026 Annual Kircher, Günther Schartz, Erhard Schipporeit, Ullrich Sierau and I received the votes required General Meeting, in compliance with the Articles of Incorporation. As Frank Bsirske left the to serve for another term. Dagmar Mühlenfeld, Peter Ottmann and Wolfgang Schüssel did corporate body, the position of my Deputy had to be restaffed. Ralf Sikorski was elected to not run for re-election. Hans Bünting, Hauke Stars and Helle Valentin were elected members this office at the first meeting of all new Supervisory Board members on 21 September. of the Supervisory Board in their place. Furthermore, positions on the committees that were vacated by exiting employee representatives were reassigned. The elections involved a new approach, which I consider to be a great step forward: the shareholder representatives received shortened and staggered tenures. Following Soon thereafter, there was another personnel change among the shareholder established practice in Germany, they used to be elected with identical five-year tenures. representatives. Günther Schartz resigned from his office as of 30 September 2021. The advantage of shortening terms is that the Supervisory Board’s composition can be Thereupon, Thomas Kufen was appointed to the corporate body by the Essen District Court adapted to new demands faster than before. Staggered tenures prevent too many people with effect from 18 October 2021. We are pleased to have found a worthy successor to from leaving the corporate body at the same time, causing valuable experience to be lost. Mr. Schartz in him. As mayor of the energy metropolis Essen, he is very familiar with our At the 2021 Annual General Meeting, five candidates were elected for three years, and sector and with RWE. We will submit the restaffing to the Annual General Meeting on another five were elected for four years. Future by-elections and new elections to the 28 April 2022 for the passage of a corresponding resolution. Supervisory Board will be for three-year terms only. One of RWE’s good traditions is the extensive support that new Supervisory Board members At its constituent meeting following the Annual General Meeting, the Supervisory Board receive from the company in familiarising themselves with their tasks. They go through a re-elected me its Chairman. I consider this to be in recognition of my work to date and thank tried-and-tested onboarding process to become acquainted with RWE’s business model, my colleagues for the trust they have placed in me. The corporate body chose Frank Bsirske the Group’s structures and certain topics as necessary. The Board Office, which is assigned as Deputy Chairman. Furthermore, we restaffed the committees. Germany's law on to Legal, has a co-ordinating function. Moreover, the Board Office informs them of their strengthening the integrity of the financial market, which was enacted in mid-2021, rights and duties, is of assistance through one-on-ones and ensures the provision of stipulates that each supervisory board must have two independent experts in finance with documents and privileges required to exchange digital information. in-depth knowledge of accounting and financial statement audits. Thanks to Erhard Schipporeit, Chairman of the Audit Committee, and Monika Kirchner, who is also a member More detailed information on the new Supervisory Board members and the composition of of this committee, we fulfil this requirement. the committees can be found on pages 220 et seqq. of this report. 11 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information An overview of the Supervisory Board's work in the past year. I would now like to touch on Main points of debate of the Supervisory Board meetings. Last year, the Supervisory the Supervisory Board's activity in the fiscal year that just ended. As usual, we fulfilled all of Board convened for seven meetings, including one constituent and one extraordinary the duties imposed on us by German law and the Articles of Incorporation. We advised the session. In our meetings, we were informed by the Executive Board in great detail of Executive Board on running the company and monitored its actions with great care. We transactions and events of significance to RWE. We discussed certain agenda items without were involved in all fundamental decisions. The Executive Board informed us of all material involving the Executive Board. The shareholder and employee representatives met aspects of business developments, the earnings situation as well as the risks and the separately before the Supervisory Board meetings, in order to consult on matters in a management thereof both verbally and in writing. This was done regularly, extensively and in smaller circle and establish joint positions where necessary. a timely fashion. In addition, I was constantly in touch with the Executive Board, allowing us to discuss major developments without delay. The following issues were discussed at our meetings: When in session, we concerned ourselves with RWE's growth strategy both repeatedly and in • Our first session last year took place on 10 March. We discussed and approved the 2020 great depth. Further focal points of debate were the effects of the coronavirus pandemic, financial statements of RWE AG, the consolidated financial statements, and the separate the restaffing of the Executive Board and the German coal phaseout. We took our decisions Non-financial Report. In addition, we passed a resolution to hold last year's Annual on the basis of detailed reports and draft resolutions submitted by the Executive Board, General Meeting on 28 April 2021 as a purely online event. At this meeting, I reported on which we discussed in depth in our plenary sessions and committees. We were also informed talks I had held with institutional investors and shareholder representatives in the months by the Executive Board of projects and transactions of special importance or urgency in prior. The agenda also included legal matters, e. g. Germany's new Supply Chain Due extraordinary meetings as well as between meetings. We passed the resolutions required of us Diligence Act, which requires companies to ensure that human rights are observed in their by German law or the Articles of Incorporation, occasionally by circular. supply chains. We also concerned ourselves extensively with the success achieved by RWE in an auction in Great Britain, at which the company won the rights to build wind farms on One of the Supervisory Board’s key tasks is maintaining dialogue with the shareholders. As two offshore sites. I do not believe that this exchange of information should be limited to the Annual General Meeting, I have been holding regular talks with investors and shareholder representatives • We convened in two sessions on 28 April, the first of which was mainly dedicated to for many years now. This is a practice I maintained despite COVID-19. The focal points of preparing the Annual General Meeting, which took place thereafter. We held the these talks were the staffing of the Supervisory Board, the staggered tenures, the Executive constituent meeting of the Supervisory Board with the newly elected shareholder Board remuneration system, RWE's strategy and the coal phaseout. representatives right after the AGM. As set out earlier, the employee representatives had been appointed by court order, because the Assembly of Delegates had to be postponed We took the basic and advanced training measures needed to fulfil our tasks on our own due to COVID-19. In addition to the election of the Chairman of the Supervisory Board initiative. The company helped us by organising in-house informational events on topics of and his Deputy, the meeting centred on staffing the committees. By amending the Articles special relevance. of Incorporation, we were able to enlarge the Strategy and Sustainability Committee by two to eight members due to its increased importance and reduce the Executive Committee by two to six members in exchange. 12 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information • In the next session on 9 June, we debated the judgment of the German Constitutional • In our session on 10 December, we reviewed and adopted the company planning for fiscal Court on the 2019 Climate Protection Act. The Court found that the law was insufficient 2022. Moreover, we fulfilled our corporate governance reporting duties: together with the because it identified the risk of substantial emissions reductions being shifted to future Executive Board, we adopted an updated statement of compliance in accordance with generations, placing too heavy a burden on them. The Executive Board informed us that Section 161 of the German Stock Corporation Act and approved the parts of the RWE expanded its goal of becoming carbon neutral by 2040 to include the company’s Corporate Governance Declaration relating to the Supervisory Board pursuant to Section entire value chain. Another piece of good news was the start of COVID-19 vaccination by 289a of the German Commercial Code. The documents are available at www.rwe.com/ RWE company physicians. statement-of-compliance and www.rwe.com/corporate-governance-declaration respectively. Further topics discussed were the liquidity position, plans to reorganise the • In our session on 21 September – the only in-person meeting last year – we welcomed the renewable energy business and the forming of the new coalition government after newly elected employee representatives to the Supervisory Board. As mentioned before, Germany's general elections on 26 September. We also discussed at great length the the Assembly of Delegates had convened a few days earlier. This resulted in some announcement of the coalition partners to accelerate the coal phaseout. Here, the changes in personnel, which required seats on the committees to be restaffed and the Supervisory Board and the Executive Board have affirmed their commitment to phasing Deputy Chairman of the Supervisory Board to be elected anew. Another main point of out RWE’s lignite-fired power generation in agreement with politicians and after weighing debate was RWE’s strategy. I stated earlier that management informed the public of the up all interests. Another item on the agenda was the positive feedback from analysts and company’s roadmap for the current decade on 15 November. The Supervisory Board was investors on our Capital Market Day in November. In a nutshell, these stakeholder groups greatly involved in developing the strategic guidelines. During the meeting in September, believe that we are charting the right course and have realistic goals. This confirmed that we focused on management's growth plans in relation to RWE's green core business and RWE’s growth and climate strategy is both ambitious and credible. It justifies the trust the phaseout of coal-fired power generation. Talks also centred on the catastrophic investors place in our company. floods in the west of Germany. The Executive Board kept us abreast of the situation at the affected sites and of RWE’s aid measures. Furthermore, we discussed the statutory Supervisory Board committees. Last year, the Supervisory Board had six standing transparency regulations applicable to the remuneration of the Executive Board and committees, the members of which are listed on page 225. These committees are charged appointed the auditor of the Remuneration Report and of the Non-financial Report for with preparing topics and resolutions for plenary sessions. In certain cases, they exercise fiscal 2021. decision-making powers if they have been conferred on them by the Supervisory Board. The Supervisory Board is informed of the work of the committees by their chairs at every • On 10 October, we held an extraordinary meeting which focused on the extreme rise in ordinary meeting. In the year under review, a total of 13 committee meetings were held, commodity prices and its effects on RWE. The collateral we pledge for electricity forward which I would like to touch upon in more detail. contracts was at times much higher than previous levels. Thanks to a substantial liquidity buffer and our highly professional financial management, however, the company was able • The Executive Committee held one meeting, which took place in December. As usual, the to meet its payment commitments at all times. objective was to discuss the company’s planning for fiscal 2022 and the outlook on the two subsequent years. 13 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information • The Audit Committee was in session four times. It carefully reviewed the financial • The Personnel Affairs Committee held three meetings. Debates centred on the personnel statements of RWE AG and the Group, together with the combined review of operations, changes on the Executive Board, the new Executive Board remuneration system, and its the report for the first half of the year, the quarterly statements and the Non-financial presentation in the Remuneration Report in accordance with Section 162 of the German Report. It discussed the financial statements with the Executive Board before they were Stock Corporation Act. The remuneration system was approved by the 2021 Annual published and received reports on the outcome of the audits and audit-like reviews General Meeting. from the independent auditors. Furthermore, the Audit Committee submitted a recommendation to the Supervisory Board regarding the election of the independent • The Nomination Committee convened three times. The Supervisory Board elections and auditors for fiscal 2021, prepared the grant of the audit award to the independent filling the position on the Committee vacated by Günther Schartz were the points of focus. auditors including the fee agreement, and set the priorities of the audit. It also verified the In view of the shortened tenures, we also discussed the long-term succession plan. independence of the auditors and the quality of the audit. Current laws require RWE to appoint new independent auditors for no later than fiscal 2024. The Committee has • The Strategy and Sustainability Committee held two sessions to consult on the details already begun preparations for the invitation to tender. Furthermore, as usual, the Audit and state of implementation of our growth strategy. Agendas focused on the progress Committee was informed of the effectiveness of the accounting-related Internal Control made in expanding renewable energy and on the Group’s numerous hydrogen projects. System (ICS). The report did not reveal any issues that would call the effectiveness of the ICS Committee members debated the strategy presentation shown at our Capital Market into question. Additional points of focus were the planning and findings of internal audits, Day in depth. Another focal point was RWE’s responsible implementation of the coal RWE’s exposure to risk pursuant to the German Corporate Control and Transparency Act phaseout. Moreover, the Committee maintained dialogue with the Executive Board on (KonTraG), the risk management system of RWE Supply & Trading, data security, compliance the varied sustainability goals and measures. matters as well as legal and tax issues. Related party transactions also featured on the agenda. The Committee verified that the transactions were in line with practices generally • The Mediation Committee pursuant to Section 27, Paragraph 3 of the German accepted on the market, as required by the German law on the implementation of the Co-Determination Act did not have to convene in 2021. Second Shareholders Directive. The independent auditors attended all of the Audit Committee meetings and also exchanged information with the Committee Chairman between sessions. In-house experts were occasionally involved in the consultations. 14 RWE Annual Report 2021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 below contains an overview of Supervisory Board member of how to interpret the numbers: ‘3 / 4’ means that the individual attended three out of attendance at the meetings of this corporate body and its committees. As the Mediation four sessions held during their membership of the corporate body. The figures show that Committee did not convene in 2021, it has been omitted from this table. Here is an example absence from a meeting was the exception. The attendance rate was 99.5 %. Attendance at meetings in fiscal 2021 by Supervisory Board member Supervisory Board Executive Committee Audit Committee Personnel Affairs Committee Dr. Werner Brandt, Chairman Ralf Sikorski, Deputy Chairman Michael Bochinsky Sandra Bossemeyer Martin Bröker Frank Bsirske Dr. Hans Friederich Bünting Anja Dubbert Matthias Dürbaum Ute Gerbaulet Prof. Dr. Hans-Peter Keitel Dr. h. c. Monika Kircher Thomas Kufen Reiner van Limbeck Harald Louis Dagmar Mühlenfeld Peter Ottmann Dagmar Paasch Günther Schartz Dr. Erhard Schipporeit 1 Werner Brandt attended meetings of the Audit Committee as a guest. 1 / 1 1 / 1 1 / 1 1 / 1 1 / 1 3 / 3 1 / 1 1 / 1 2 / 2 3 / 3 2 / 2 4 / 41 2 / 3 4 / 4 1 / 1 4 / 4 1 / 1 4 / 4 7 / 7 7 / 7 7 / 7 7 / 7 4 / 4 4 / 4 5 / 5 4 / 4 7 / 7 7 / 7 7 / 7 7 / 7 1 / 1 3 / 3 7 / 7 2 / 2 2 / 2 3 / 3 5 / 5 7 / 7 15 Nomination Committee 3 / 3 Strategy and Sustainability Committee 2 / 2 2 / 2 1 / 1 1 / 1 1 / 1 2 / 2 3 / 3 2 / 2 1 / 1 1 / 1 1 / 1 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Attendance at meetings in fiscal 2021 by Supervisory Board member Supervisory Board Executive Committee Audit Committee Personnel Affairs Committee Nomination Committee Strategy and Sustainability Committee Dirk Schumacher Dr. Wolfgang Schüssel Ullrich Sierau Hauke Stars Helle Valentin Dr. Andreas Wagner Marion Weckes Leonhard Zubrowski 1 / 1 3 / 3 2 / 2 7 / 7 5 / 5 5 / 5 3 / 3 7 / 7 4 / 4 4 / 4 3 / 3 2 / 2 1 / 1 2 / 2 2 / 2 2 / 2 1 / 1 1 Werner Brandt attended meetings of the Audit Committee as a guest. Conflicts of interest. The members of the Supervisory Board are obliged by law and the The 2021 Annual Report and the audit reports as well as documents supporting the annual German Corporate Governance Code to immediately disclose any conflicts of interest they financial statements were submitted to the members of the Supervisory Board in good time. have. We were not notified of any such conflict in fiscal 2021. Furthermore, the Executive Board commented on the documents at the Supervisory Board’s balance sheet meeting of 9 March 2022. The independent auditors reported in this Financial statements for fiscal 2021. PricewaterhouseCoopers GmbH session on the material results of the audit and were available to provide supplementary Wirtschaftsprüfungsgesellschaft (PwC) audited and issued an unqualified auditor’s opinion information. The Audit Committee had previously concerned itself in depth with the financial on the 2021 financial statements of RWE AG, which were prepared by the Executive Board statements of RWE AG, the consolidated financial statements, as well as audit reports in compliance with the German Commercial Code, the financial statements of the Group during its meeting on the preceding day, with the auditors present. It recommended that the prepared pursuant to Section 315a of the German Commercial Code in compliance with Supervisory Board approve the financial statements as well as the appropriation of International Financial Reporting Standards (IFRS) as well as the combined review of distributable profit proposed by the Executive Board. The financial statements of RWE AG, operations for RWE AG and the Group including the accounts. The opinion was signed by the the consolidated financial statements, the combined review of operations, the Executive auditors in charge, Markus Dittmann and Aissata Touré. In addition, PwC subjected the Board’s proposal regarding the appropriation of distributable profit, and the Non-financial Non-financial Report to a limited assurance audit and found that the Executive Board had Report were reviewed by the Supervisory Board. The corporate body did not raise any established an appropriate early risk detection system. The company had been elected objections as a result of this review. As recommended by the Audit Committee, the independent auditor by the 2021 Annual General Meeting. Thereafter, the Supervisory Supervisory Board endorsed the findings of the audits of the financial statements of RWE AG Board had commissioned it to audit the aforementioned financial statements and reports. and the consolidated financial statements and approved both financial statements. The 2021 annual financial statements are therefore adopted. The Supervisory Board concurs with the Executive Board’s proposal regarding the appropriation of profits, which envisages paying a dividend of €0.90 per share. 16 RWE Annual Report 20211 To our investors Supervisory Board report 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Success and solidarity: A big thank you to everyone at RWE. Anyone who sets off on a major journey needs motivated people who have their sights set firmly on the destination and are also capable of reaching it. Without a doubt, this applies to RWE. The past fiscal year showed that our company can rely on the expertise and dedication of its employees. Despite the coronavirus and the substantial financial loss sustained due to an unusually harsh cold snap in Texas, 2021 turned out to be a very successful year. On behalf of the Supervisory Board, I would like to express our deep-felt gratitude to the staff members who made this possible. As mentioned earlier, I was extremely impressed by how everyone pulled together and was willing to pitch in to provide the much needed assistance in the wake of the catastrophic floods in parts of western Germany. So many people made donations and rolled up their sleeves, demonstrating what it means to stand united. I have always been proud to be the Chairman of RWE’s Supervisory Board. And I now have even more reason to feel this way. Werner Brandt Chairman of the Supervisory Board Essen, 9 March 2022 17 RWE Annual Report 2021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 Fiscal 2021 was a good year for investors in stock markets despite the continued DAX up 16 % thanks to economic recovery. Although 2021 was overshadowed by the coronavirus pandemic. Driven by a global economic upturn, the DAX repeatedly hit new COVID-19 crisis, optimism prevailed on international stock markets. The DAX continued all-time highs. Germany’s blue chip index closed the year with a strong gain of 16 %. its course for recovery which began in 2020, climbing from one all-time high to the next. The RWE share was unable to match this pace, after having consistently left the DAX far It closed the year at 15,885 points, representing a return of 16 %. The resurgence of the behind in the four preceding years. The total return of the RWE share, made up of the stock markets was driven by a marked acceleration of the economy. Certain sectors such change in price and the dividend, amounted to 6 %. In part, the shortfall versus the DAX as automotive experienced a veritable boom despite worldwide logistical problems. Share is due to the fact that utility stocks often trail cyclical shares when the economy trends prices were also positively affected by the European Central Bank maintaining its upwards. By contrast, we made the headlines on the debt capital market: RWE AG issued expansionary monetary policy despite mounting inflation. its first green bonds in 2021, raising €1.85 billion for the expansion of renewables. RWE share registers 6 % total return. The RWE share also posted gains, albeit smaller than those recorded by the DAX. It closed the month of December 2021 at €35.72. Taking account of the dividend of €0.85 paid in May 2021, this results in a total return of 6 % for the year. Therefore, our share was outperformed not only by the DAX but also by the STOXX Europe 600 Utilities, which registered a gain of 9 %. Financial analysts confirm the attractive earnings prospects of renewable energy companies like RWE. However, the economic upswing has resulted in a return to strong investment in cyclical stocks. In addition, some capital market participants fear that mounting competitive pressure in the renewable energy business, e. g. created by oil companies entering the market, and rising material costs, may make wind and solar projects less profitable. In February 2021, we suffered substantial financial losses due to extreme weather conditions in Texas, which also weighed on the share price. RWE stock received tailwind in November when we published our growth plans and earnings prospects for the current decade at a Capital Market Day (see pages 25 et seqq.). RWE made up for ground lost to the DAX and the sector index thereafter. Total return of the RWE share compared with the DAX and STOXX Europe 600 Utilities % (average weekly figures) 20 15 10 5 0 – 5 – 10 – 15 3 1 D ec 2 0 2 0 3 1 M ar 2 0 2 1 3 0 Jun 2 0 2 1 3 0 Sep 2 0 2 1 3 1 D ec 2 0 2 1 RWE share STOXX Europe 600 Utilities DAX Source: Bloomberg. 18 RWE Annual Report 2021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 indicators1 Earnings per share Adjusted net income per share Cash flows from operating activities of continuing operations per share Dividend per share Dividend payment Share price End of fiscal year Highest closing price Lowest closing price Share dividend yield3 € € € € € million € € € % 2021 1.07 2.32 10.76 0.902 6092 35.72 38.65 28.64 2.5 2020 1.65 1.97 6.47 0.85 575 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 Number of shares outstanding (annual average) thousands 676,220 637,286 614,745 614,745 614,745 Market capitalisation at the end of the year € billion 24.2 23.4 16.8 11.7 10.3 1 The comparability of some of the figures for various fiscal years is limited due to changes in reporting. 2 Dividend proposal for RWE AG’s 2021 fiscal year, subject to the passing of a resolution by the 28 April 2022 Annual General Meeting. 3 Ratio of the dividend per share to the share price at the end of the respective fiscal year. Dividend of €0.90 per share proposed for past fiscal year. In view of the Group’s good Broad international shareholder base. Based on our latest survey, at the end of 2021, an earnings, the Executive Board and the Supervisory Board of RWE AG will propose a dividend estimated 87 % of the total of 676.2 million RWE shares were held by institutional investors of €0.90 per share to the next Annual General Meeting on 28 April 2022. This is €0.05 and 13 % were owned by individuals (including employees). Institutional investors from more than last year. €0.90 is the lower limit we have set for the dividend for the coming Germany owned 23 % of our capital stock. This investor group accounted for 16 % in the rest years. In the long run, we intend to pay 50 % to 60 % of adjusted net income to our of Continental Europe, 14 % in the United Kingdom / Ireland and 26 % in North America. At shareholders. the end of 2021, RWE AG’s single-largest shareholder was the US asset management company BlackRock, with a stake of 7 %. 19 RWE Annual Report 2021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 Profit participation through employee shares. About 1 % of our stock is owned by our current and former staff members. German and British Group companies offer their  1 % Employee shareholders  7 % BlackRock, Inc. employees the opportunity to take shares in RWE on preferential terms. Last year, 87 % Institutional shareholders 7,023 people, representing 40 % of all qualifying staff members, made use of these offers and bought a total of 312,000 shares. The preferential terms and the administration of the 12 % Private shareholders 26 % 23 % 16 % 14 %  8 % USA / Canada Germany Continental Europe excluding Germany UK / Ireland Rest of the world 80 % Other institutional shareholders employee share ownership programmes led to an expense of €2.9 million. Ticker symbols and identification numbers of the RWE share Reuters: Xetra Bloomberg: Xetra German Securities Identification Number International Securities Identification Number (ISIN) ADR CUSIP Number RWEG.DE RWE GY 703712 DE0007037129 74975E303 1 As of the end of 2021; percentages reflect shares in subscribed capital. Sources: RWE data and notifications from shareholders in accordance with the German Securities Trading Act. 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 100 % free float of the capital stock. The free float of our shares considered by Deutsche such as Xetra. They are also available on stock markets in the rest of Europe. In the USA, Börse in terms of index weighting was 100 % when this report went to print. Normally, shares RWE is represented via a Level 1 ADR programme, under which American Depositary held by investors accounting for at least a cumulative 5 % of the capital stock are not Receipts – or ADRs for short – are traded in place of our shares. ADRs are share certificates included in the free float. However, a higher threshold of 25 % applies to asset management issued by US depositary banks, representing a certain number of a foreign company’s companies like BlackRock. deposited shares. Under RWE’s programme, one ADR represents one share. 20 RWE Annual Report 20211 To our investors RWE on the capital market 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements 5 Further information Ticker symbols and identification numbers of RWE green bonds Issue date Issue price (%) Volume (€ million) Maturity Nominal interest rate (%) German Securities Identification Number International Securities Identification Number 11 Jun 2021 99.711 500 11 Jun 2031 0.625 A3E5VA XS2351092478 26 Nov 2021 99.808 750 26 Nov 2028 0.500 A3MP70 XS2412044567 26 Nov 2021 99.138 600 26 Nov 2033 1.000 A3MP71 XS2412044641 RWE enters green bond market. RWE AG issued its first green bond in June 2021. The paper has a nominal volume of €500 million, a ten-year tenor and a 0.625 % coupon. Later in the year, two more green bonds were placed on the market: one with a volume of €750 million, a 0.5 % coupon and a seven-year tenor, and another with a volume of €600 million, a 1.0 % coupon and a twelve-year tenor. All three of the issuances met with keen interest among investors. Capital raised by the issuance of green bonds must be spent on projects that contribute to protecting the environment and climate. RWE’s green bond policy stipulates that proceeds on issuances be spent on wind and solar farms exclusively. This is in line with the United Nations’ Sustainable Development Goals. One of these objectives is to increase the share of the global energy mix accounted for by renewables. RWE’s rules also comply with the generally accepted Green Bond Principles of the International Capital Market Association (ICMA). This has been certified by Sustainalytics, a prominent sustainability agency. We have summarised the main features of our three green bonds in the above table. In addition, we have two hybrid bonds outstanding (€282 million and US$317 million) with earliest redemption dates in 2025 and 2026, respectively. A residual amount (€12.2 million) of a standard bond that matures in 2037 – which we could not fully transfer to innogy, a former subsidiary of ours acquired by E.ON, at the end of 2016 – has not been redeemed, either. Further information on outstanding RWE bonds can be found at www.rwe.com/bonds. 21 RWE Annual Report 2021“Energy is all around us. All we have to do is harness it.” Jason Jackson, Site Operations Manager at Hickory Park (USA), RWE Renewables 2 Combined review of operations 2.1 Strategy 2.2 Innovation 2.3 Business environment 2.4 Major events 2.5 Commentary on reporting 2.6 Business performance 2.7 Financial position and net worth 2.8 Notes to the financial statements of RWE AG (holding company) 2.9 Outlook 2.10 Development of risks and opportunities 2.11 Disclosure relating to German takeover law 23 30 34 40 46 48 60 65 67 70 80 1 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.1 Strategy In November 2021, we informed the public about our growth and earnings targets for Carbon-neutral energy – the great challenge of our time. In most industrial countries, this decade and received very positive feedback. By 2030, we intend to invest €50 billion energy policy is shaped by climate change. In the past, the main objective was to provide a in renewables, battery storage, gas-fired power stations and electrolysers. Including reliable, affordable supply of electricity and fuel, whereas nowadays – more so than ever proceeds from selling stakes in projects, we foresee net investments of €30 billion. This before – our energy consumption should not be to the detriment of the Earth’s temperature. will double our generation capacity in these technologies to 50 GW by 2030. At the Most industrialised countries where we do business want to minimise their emissions of same time, we are successively phasing out electricity generated from coal and setting greenhouse gases generated by the use of fossil fuels. Over the long run, the goal is to the stage for RWE to be carbon neutral by no later than 2040. This will not only make RWE achieve climate neutrality, i. e. a state in which humankind zeroes out its net emissions of greener, but also more profitable. Our 2030 goal is to achieve an adjusted EBITDA in our greenhouse gases into the atmosphere. The European Union and the UK want to be climate core business segments of €5 billion. This would represent an increase of around 80 % neutral by 2050, while Germany wishes to reach this goal by 2045. Both these objectives compared to 2021. call for the fundamental restructuring of the way in which companies and households consume energy. This transformation has many aspects. For the energy industry, the following issues need to be addressed: Who we are and what we do. RWE is a leading international energy company headquartered in Essen, Germany, with a focus on power generation. Energy sources such • Decarbonising electricity generation. The energy transition is basically about as wind and solar are an increasingly important part of our business. Our core activities also abandoning electricity generation from fossil fuels and embracing renewables. Coal and include the storage of electricity and natural gas, the hydrogen business, trading of energy- natural gas are finite resources, the use of which leads to the emission of greenhouse related commodities and innovative energy solutions for industrial customers. We generated revenues of €24.5 billion in fiscal 2021. Our key markets are Germany, the United Kingdom, the Netherlands and the USA. In the field of renewables, we are also active gases. By contrast, wind, solar and hydro are energy sources which do not generate CO2 emissions, are available in abundance and thus form the foundation for a sustainable supply of electricity and heat. The EU has set the goal of covering at least 32 % of final in a whole host of other countries, for example in Poland, Spain, Italy, Sweden and Australia. energy consumption from renewable sources by 2030. At present, work is under way on a We intend to position ourselves even more broadly geographically in our renewables directive which calls for an even higher proportion of at least 40 %. Numerous countries business. For example, we are stepping up our efforts to win offshore wind projects in new both inside and outside the EU have specific plans to phase out the use of coal and markets such as Norway, Japan, South Korea and Taiwan. ambitiously expand renewables. 23 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Creating storage and backup capacities. Electricity generation using renewable We’re driving the energy transition. RWE is well positioned to contribute to transforming sources depends on the weather conditions as well as the time of day and the season. the energy sector and the broader economy in all of the areas discussed above. And that is Sometimes, renewables can only cover a fraction of demand, while at other times, their precisely what we are doing, by investing billions of euros in wind power, photovoltaics, generation exceeds local needs so much that production actually has to be throttled. battery storage and green hydrogen, phasing out coal-based generation, building Consequently, as energy supply becomes increasingly reliant on wind and solar farms, environmentally friendly backup capacities and helping industrial customers optimise their power storage systems become ever more important for stabilising the power grids. energy consumption. These activities make us a driving force in the energy transition and Furthermore, we need more environmentally-friendly, flexible generation assets, which allow us to support the countries where we do business in their efforts to achieve climate can reliably produce power when there is no wind and no sunshine. Modern gas-fired protection targets. Our commitment in this regard is reflected by our own ambitious plans: power stations that can be retrofitted to run on carbon-free fuels like hydrogen will be we want to be carbon neutral by 2040 at the latest, ten years earlier than the EU. Not only well-positioned for this task, once the necessary volumes of such fuels are available. does this apply to our own greenhouse gas emissions (referred to as Scope 1), it also covers • Replacing fossil fuels with green power. Simply reducing emissions in the power ourselves ambitious goals for the current decade: by 2030, we want to reduce our generation sector is not enough to achieve climate neutrality. At present, over 70 % of emissions by 50 % (Scope 1 and 2) and 30 % (Scope 3) compared to 2019. At the Paris European energy consumption is still covered by oil, coal and natural gas. Electrification – Climate Conference in 2015, the global community committed to limiting the increase in in other words switching energy consumption to electricity produced with carbon-neutral average global temperatures to well below two degrees Celsius compared to pre-industrial methods, e. g. by using heat pumps instead of oil and gas heating systems – also enables levels. Our actions are in line with this target, as was officially confirmed by the independent significant emission reductions in the manufacturing, heat and transportation sectors. Science Based Targets initiative at the end of 2020. However, our ambitions do not end Thus, over the long run, demand for electricity in our markets will expand significantly. there. Moving forward, we have also set our sights on ensuring we adhere to the target of the upstream and downstream value chain (Scope 2 and Scope 3). We have also set 1.5 degrees Celsius established at the Paris Climate Conference. • Establishing the hydrogen economy. The economy can only be completely decarbonised if solutions are also found for applications where direct electrification is not an option. Sustainability – at the heart of our corporate culture. A sustainable business involves far Examples of this are the production of steel and fertilisers as well as aviation and shipping. more than cutting greenhouse gas emissions. Sustainability is measured in a myriad of In the near future, hydrogen produced with zero-carbon methods would be a solution. ways. The expression is generally used in relation to the environment, society and Taking a longer-term perspective, using hydrogen as a storage medium will also be a key governance (ESG). Last year, we reassessed our approach to the topic of sustainability. component of a climate-neutral energy system. According to the European Commission, Working together with internal and external experts, we defined the fields of action that are by 2030 the EU should have electrolysers with a total capacity of at least 40 GW capable of most significance to RWE and what we want to achieve in these areas. In addition to of producing 10 million metric tons of hydrogen annually. Germany is looking to expand reducing greenhouse gas emissions, one of our most important environmental efforts is its electrolysis capacity to 10 GW by the end of the decade, as recently announced by the preserving biodiversity at the sites where we operate. In particular, this involves the new coalition government comprising the SPD, the Greens and the FDP. recultivation of mining areas, as well as the erection, operation and decommissioning of wind farms. We want to reduce the use of natural resources and significantly boost our recycling ratio at the same time. 24 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information As a company, we take great responsibility in the communities where we do business. We This capital expenditure will be divided up roughly four ways between Germany, the United want to live up to this responsibility across all our sites. In the Rhenish lignite mining region, Kingdom, the USA and our other markets. In net terms, i. e. taking into account cash flows we are acutely aware of our prime-aged employees who are losing their jobs due to the coal from divestments, we expect that our investments will total around €30 billion. We will use phaseout, and are in the process of securing socially acceptable solutions to this issue. these funds to massively expand our climate-friendly generation capabilities. Including Occupational health and safety is another key concern of ours. Our aim is to ensure that the battery storage and electrolysers, we intend to have a generation capacity of around 50 GW employees at our sites leave work at the end of each day as healthy as when they arrived. by 2030. This target is a pro-rata figure, meaning we state our capacity according to our We also advocate for a diverse, inclusive corporate culture. Diversity has many facets. One is shareholding ratios. In order to reach 50 GW, we will have to build approx. 25 GW. At 21 GW, gender equality when filling leadership roles within the company. In our core business, which the majority of this capacity will come from wind farms, solar assets and battery storage. covers all Group activities with the exception of Coal / Nuclear, the share of women in It will be supplemented by flexible gas-fired power stations and electrolysers with a total executive positions was 19 % at the end of 2021. We aim to reach 30 % by 2030. installed capacity of 2 GW each. Our adjusted EBITDA will also rise sharply in conjunction Our mission statement ‘Our energy for a sustainable life’ truly encompasses our purpose as from our green core business. By comparison, in fiscal 2021 we posted adjusted EBITDA with our generation capacities. For 2030, we project a level of €5 billion, generated solely a company and confirms that sustainability is a principle that guides our actions. Our of €2.8 billion from our core activities. commitment in this regard is made tangible by the fact that achievement of ESG targets has a direct impact on the level of Executive Board remuneration. Further information on Turning to the individual components of our growth programme: our ESG goals and accomplishments can be found in our Sustainability Report and in the separate Non-financial Report in accordance with Section 315b, Paragraph 3 of the • Offshore Wind. We have been active in offshore wind for 20 years now, making us a world German Commercial Code. The reports for fiscal 2021 will be published in April 2022 and leader in this field. At the end of 2021, our offshore wind power portfolio had a total pro- will be accessible at www.rwe.com/responsibility-and-sustainability. Our website also has rata capacity of 2.4 GW. This figure is expected to hit 8 GW by 2030. We currently operate further information on how independent rating agencies assess our sustainability strategy wind farms in the coastal waters of the United Kingdom, Germany, Belgium, Sweden and at www.rwe.com/ratings-and-rankings. Denmark. Europe is our most important region in terms of growth. Examples for this include projects such as Sofia (UK / 1,400 MW), Kaskasi (Germany / 342 MW), Thor Growing Green – our strategic roadmap to 2030. In mid-November 2021, we informed (Denmark / 1,000 MW) and F. E. W. Baltic II (Poland / 350 MW). We are also looking to the public about the strategy and goals for our business activities during the current decade markets outside of Europe: together with local partners, we are working on offshore wind at our Capital Market Day event. An ambitious growth programme in our green core business projects in the USA, Japan, Taiwan and South Korea. But we are interested in more than forms the centrepiece of our strategy, which is entitled ‘Growing Green’. In the 10-year period just regional opportunities, as we want to tap into new technological options as well. In from 2021 to the end of 2030, we intend to invest approximately €50 billion in new wind order to realise the full potential of offshore wind, we will also be operating wind turbines farms, photovoltaic assets, battery storage, gas-fired power plants and electrolysers. on floating platforms in the future. Together with our partners, we are exploring which types of foundations are best suited for this (see page 30 et seq.). The first prototype co-engineered by RWE – the TetraSpar Demonstrator off the coast of Norway – started operating in autumn 2021. 25 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Onshore Wind / Solar. We also have more than two decades of experience in onshore • Flexible gas-fired power plants. The supply gap caused by the coal phaseout cannot wind and rank among the global leaders, with pro-rata generation capacity of 7 GW. be resolved by energy storage solutions alone. We need to build low-carbon backup We intend to boost this figure to 12 GW by 2030. In terms of solar, where our capacity capacities that can balance out the fluctuations in power generation from solar and wind. currently stands at 0.5 GW, we are still in the start phase. However, we aim for a steep This presents growth opportunities, particularly for established power generators such as expansion curve towards 8 GW by the end of the decade. We are concentrating our RWE. Gas-fired power plants play a key role in this regard. With an installed capacity of onshore wind and solar efforts on North America and Europe, where we are looking to 14.1 GW, our fleet of gas-fired stations is the second largest in Europe, and we want to diversify geographically. For instance, we have partnered with Public Power Corporation build another 2 GW of capacity by 2030. We see a need for investment in Germany in (PPC), Greece’s largest energy group, to position ourselves as a solar power producer in its particular, where the coal exit is coinciding with the nuclear phaseout. Nevertheless, the home market. In the United States, we are also expanding into new territories. Evidence of construction of new assets in Germany involves a high degree of political and economic this can be found at Scioto Ridge, our first wind farm in Ohio, which started operating in uncertainty, unless the plants receive guaranteed remuneration based on the Combined May 2021. Our main focus in terms of growth ventures rests on countries and market Heat and Power Act or via capacity auctions held by the grid operator. In one such segments harbouring potential for more than one technology, e. g. for photovoltaics plus auction, we won the right to construct a 300 MW grid stabilisation unit at our Biblis site, wind energy and / or electricity storage. which is scheduled to start operation in 2022. • Battery storage. Demand for electricity storage is increasing as power generation shifts The Institute of Energy Economics at the University of Cologne (EWI) estimates that to wind and solar assets. RWE has been involved in the development, construction and Germany needs to add gas-fired plants with a total capacity of 23 GW by 2030 if the operation of battery storage systems for many years now. For this decade, we are targeting country is set on phasing out coal over that same period. We are prepared to play our an installed capacity of 3 GW, compared to 47 MW in late-2021. We are currently rolling part. Not only does RWE have the necessary expertise, it also has a number of favourably out a key battery project in Hickory Park, which is located in the south of Georgia, USA. situated sites. That said, we can only make these investments if the necessary incentives This site will be home to a 196 MW solar farm coupled to a 40 MW battery storage are provided for, which could include capacity payments for example. New assets would system. This combination will enable electricity feed-ins into the local grid to be optimised, then receive remuneration for being online and thus ensuring security of supply. This would significantly improving the solar array’s yield. Future photovoltaic projects will largely follow ensure economic viability even with low capacity utilisation. Furthermore, conditions must this approach. We are also building battery storage to provide grid services. Two examples be in place for us to operate our gas-fired power stations using green hydrogen over the of this are the massive batteries with storage capacities of 72 MW and 45 MW, which we longer term. We are planning the necessary retrofits for our existing gas-fired assets and are currently installing at our German power plant sites in Werne and Lingen. have already finalised the relevant strategies. Power plants that do not run on hydrogen, could separate CO2 from the flue gas and store it underground. For political reasons, however, this option can only be considered outside Germany for the time being. 26 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Hydrogen. The hydrogen economy is a crucial part of the energy transition and a perfect Above and beyond this, RWE Supply & Trading has established itself as an intermediary complement to our business model. We want to be active along the entire value chain, for pipeline gas and liquefied natural gas (LNG). Thus, in addition to meeting the needs from green electricity generation and hydrogen production by electrolysis to hydrogen of our Group companies, it also serves numerous industrial customers around the world. trading and storage and the conclusion of individual supply agreements with major To this end, it enters into long-term supply agreements with producers, organises gas industrial customers. Our regional focus in these activities is on Germany, the United transportation by booking pipelines or LNG tankers and optimises the timing of deliveries Kingdom and the Netherlands. In recent years, we have forged a range of partnerships using leased gas storage facilities. In this regard, the greater the size and diversification of with businesses and research institutes seeking to work closely with us to develop a the procurement and supply portfolios, the better the chances to commercially optimise comprehensive hydrogen infrastructure. Noteworthy projects include the German them. The gas business also opens up opportunities for activities in the field of hydrogen. initiatives GET H2 and AquaVentus, the Dutch projects Eemshydrogen and NortH2 and One example in this regard is the long-term partnership between RWE Supply & Trading and our partnership with Shell, which was formed at the end of 2021. At present, we are Australian LNG producer Woodside. We intend to purchase liquefied natural gas from participating in around 30 hydrogen projects. By 2030, we intend on developing Woodside as of 2025 and collaborate on investigating the potential to market hydrogen to electrolysis capacities totalling 2 GW. We are designing facilities that allow for industrial- RWE’s customer base in Asia and Europe. Another example that relates to the development scale production. Examples of this include the three electrolysers slated to start of the hydrogen economy is the planned Brunsbüttel LNG terminal near Hamburg, which production at the Lingen power station in the period from 2024 to 2026. With RWE Supply & Trading is helping to realise. In future, green ammonia could also be imported capacities of 100 MW each, these units will be among the largest of their kind in Europe. to Germany via the terminal and converted into hydrogen in the port area. More information on our hydrogen strategy and our major projects can be found at www.rwe.com/hydrogen. Socially-acceptable phaseout of coal-fired generation. Our growth programme is flanked by a rapid coal exit. In the United Kingdom and Germany, we already phased out Energy trading and customer solutions. In addition to power generation, we are also hard-coal-fired power generation in 2019 and 2021, respectively. We are currently only focused on energy trading as one of our core competencies. It is managed by the Group using hard coal in our Dutch stations Amer 9 and Eemshaven, where biomass is co-fired. company RWE Supply & Trading, which acts as our window into the energy markets. From 2025 and 2030, respectively, we will no longer be using hard coal in these plants. Around 200 RWE specialists trade electricity, fuel and emission rights around the clock. For RWE, the phaseout of lignite, which is produced and turned into electricity in the Rhenish RWE Supply & Trading also markets the electricity from our power stations and procures the mining region to the west of Cologne, is much more complex and difficult in terms of the fuel and emission allowances required to produce it. The objective here is to limit price risks. social ramifications. In early 2022, we still operated lignite-fired power stations with a total On top of that, the company is in charge of the commercial optimisation of our power plant capacity of 7.6 GW, a third less than in 2015. This year, we will also be shutting down dispatch, the earnings of which go to our generation companies. Companies outside of the another 1.6 GW of capacity. Pursuant to current legislation, the last unit will go offline in RWE Group can also benefit from the expertise of our trading subsidiary. They are offered a 2038. However, the new German government has already announced that they are wide range of products and services, running the gamut from traditional energy supply looking to accelerate the phaseout of coal in Germany and are working towards a deadline contracts and comprehensive energy management solutions to sophisticated risk of 2030. management concepts. 27 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE supports the Federal government’s climate protection ambitions. If it were possible to Nuclear power: Our focus is on safe and efficient decommissioning. Germany’s phaseout provide for the necessary framework conditions in pursuit of accelerating the coal exit, we of nuclear power will soon be completed. RWE’s Gundremmingen C power plant and two would be able to progress more quickly on our path of reducing emissions. At the same time, units belonging to other companies were taken offline at the end of 2021, leaving just three this would also be associated with significant additional financial burdens for us. The regional sites to produce electricity, of which one is run by RWE. At the end of 2022, these present legal phaseout roadmap already presents us with tremendous challenges – from will also cease generation. After that, our nuclear power operations will be focused operational, financial and social standpoints. At the end of 2019, before the Coal Phaseout exclusively on the safe and efficient decommissioning of the plants. Moreover, we are Act entered into force, some 10,000 people were employed in the Rhenish mining region; in making efforts to ensure that the sites continue to be used for energy-related purposes, 2030 less than 4,000 will work there. Although the personnel affected by job losses will as illustrated by the example of the grid stabilisation unit at Biblis. receive state support, such as an adjustment allowance, we will also pay for redundancy measures ourselves. In August 2020, we concluded the ‘Coal Exit’ tariff agreement with ver.di, RWE AG’s management system. Our management system is geared towards sustainable Germany’s United Services Trade Union, and IG BCE, the country’s Industrial Mining, Chemicals growth that creates value and is based on RWE’s strategic guidelines. To determine these and Energy Trade Union. It defines what benefits RWE will provide above and beyond the guidelines, we analyse the market environment and competitiveness of our segment state-guaranteed payments. Early retirement plans will apply to most of those affected. activities, identify growth potential and weigh up the opportunities and risks involved. Which Younger employees will be reassigned to new positions within the Group, or – where that is projects are ultimately realised is at the discretion of the management of the Group not possible – will be offered severance packages. company concerned. Larger investments are approved by the Executive Board of RWE AG. It also determines the allocation of capital, the long-term portfolio development and the Our responsibility to the people in the Rhenish coal region does not end at the factory gates: type of financing. we want to do our part to ensure that the region remains structurally resilient and integrated within the energy sector, despite the coal phaseout. By 2030, we want to invest €4 billion in To operationally manage the Group’s activities, RWE AG deploys a groupwide planning and renewables, gas-fired power plants and electrolysers in North Rhine-Westphalia, with no less controlling system, which ensures that resources are used efficiently, and provides timely, than 500 MW of wind and solar capacities being built in the Rhenish region alone. Some detailed insight into the current and prospective development of the company’s assets, recultivated land is very well suited for these plans, and three RWE wind farms are already financial position and net earnings. Based on the targets set by the Executive Board and located there. We also want to further develop our power plant sites. For example, there are management’s expectations regarding the development of the business, once a year we plans to build an innovation, technology and commercial park in Frimmersdorf and the formulate our medium-term and long-term plans, in which we forecast the development of surrounding area. At the Weisweiler site, within the scope of an EU project, we are looking key financial indicators. The medium-term plan contains the budget figures for the following into the possibility of capturing geothermal heat, which could be fed into the district heating fiscal year and planned figures for the two years thereafter. The Executive Board submits the network of the greater Aachen area. In addition, we are researching power-to-gas plan to the Supervisory Board, which reviews and approves it. During the respective current technology at the Niederaussem Innovation Centre. This is where, since 2013, we have used fiscal year, we produce internal forecasts based on the budget. Members of the Executive hydrogen and carbon dioxide made by electrolysis to produce fuel and feedstock for the Board of RWE AG and the main operating companies meet regularly to analyse the interim chemical industry for research purposes. and annual financial statements and update the forecasts. In the event that the forecast figures deviate significantly from the budget figures during a fiscal year, we analyse the underlying reasons and take countermeasures if necessary. We also immediately notify the capital market if published forecasts need to be modified. 28 RWE Annual Report 20211 To our investors 2 Combined review of  operations Strategy 3 Responsibility statement 4 Consolidated financial statements 5 Further information Key earnings indicators. Among other things, we use key earnings indicators such as Safeguarding our financial strength and creditworthiness. The RWE Group’s financial EBITDA, EBIT and net income to manage our business; however, we adjust these indicators position is analysed using cash flows from operating activities, amongst other things. We by removing special items. EBITDA is defined as earnings before interest, taxes, depreciation also attach special importance to the development of free cash flow, which is derived by and amortisation. In order to improve its explanatory power in relation to the development deducting capital expenditure from cash flows from operating activities and adding of ordinary activities, we remove non-operating or aperiodic effects and present these in the proceeds from divestments and asset disposals. Net debt is another indicator of RWE’s non-operating result. This applies to capital gains or losses, temporary effects from the fair financial strength: it is calculated by adding provisions for pensions and similar obligations, valuation of derivatives, goodwill impairments and other material special items. Subtracting for the dismantling of wind farms and for nuclear waste management to RWE’s net financial operating depreciation and amortisation from adjusted EBITDA yields adjusted EBIT. position. Conversely, mining provisions, our 15 % stake in E.ON and compensation for the Adjusted net income is another key operating indicator for us. We calculate it by correcting German lignite exit, as confirmed by the German government, are disregarded. net income to exclude the non-operating result, and material special items in the financial result. Instead of the actual tax rate, which reflects one-off effects, we apply the budgeted In managing our indebtedness, we orientate ourselves towards the leverage factor, i. e. the rates of 15 % (until 2022) and 20 % (from 2023), which we have derived in consideration of ratio of net debt to adjusted EBITDA in our core business. Given that we recorded positive the earnings in our core markets, the tax rates applicable there and the utilisation of loss net assets rather than net debt as of 31 December 2021, the leverage factor was below carryforwards. zero. For the coming years, we expect net debt to trend upward, as we will partially finance our growth investments with debt capital. Over the medium term, however the leverage Expected minimum return on investments. We primarily use the internal rate of return (IRR) factor should not exceed 3.0, as we wish to maintain our financial flexibility. For the period to evaluate the attractiveness of investment projects. We only undertake projects if – at the after 2025 we believe that an upper limit of 3.5 is reasonable, as the expansion of time of the investment decision – the expected IRR stays within a defined minimum renewables will enhance our financial stability and our political risk exposure will decline threshold, which is determined on the basis of the weighted average cost of capital (WACC). with the gradual phaseout of coal-based power generation. The WACC is augmented with project-specific risk premiums, which usually range from 100 to 300 basis points, depending on the technology or region. Using this approach, we Attractive dividend of at least €0.90 per share. Despite the significant funds needed for have set lower limits which vary from 5 % to 9 % for offshore wind projects. Minimum returns capital expenditure, RWE will remain an attractive dividend stock in the future. We will of 4 % to 7 % are applied to projects involving the construction of onshore wind farms, solar propose a dividend of €0.90 per share to the Annual General Meeting on 28 April 2022 for assets or batteries in Europe or the USA. The thresholds for new gas-fired power plants or fiscal 2021. This will also constitute the minimum payout for the coming years. Over the hydrogen activities are set between 6 % and 11 %. long term, we plan to distribute 50 % to 60 % of adjusted net income to our shareholders. 29 RWE Annual Report 20211 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.2 Innovation The success of the energy transition doesn’t simply hinge on the dedication with which On the following pages, we present a small selection of our current innovation projects. They we implement it. It is also the degree of innovation deployed to fuel these strategies illustrate the breadth and variety of the challenges we face in light of the energy transition that is decisive. Whether it’s expanding renewable energy capacities, transitioning to a and demonstrate the creativity with which we are tackling these issues. hydrogen economy or opting for environmentally friendly carbon recycling methods, technical challenges lurk behind every turn, waiting for solutions to address them. In How we are using new technologies for offshore wind expansion. There are currently 2021, RWE worked on close to 200 research and development projects in collaboration 170 offshore wind farms operating around the world. All are located in shallow coastal with partners from industry and science. All these projects share one common goal: waters with turbines firmly anchored to the seabed. Coastal regions with greater water to overcome hurdles on the road to an environmentally friendly, stable and sustainable depths have – until recently – been off-limits to offshore wind farms. After all, the deeper energy world. the water, the more expensive the foundation. Wind power projects generally become uneconomical at depths of over 60 metres. According to WindEurope, the European wind industry association, in about 80 % of all coastal sea areas where wind speeds are suitable Solutions for a sustainable energy system. RWE is innovative in many ways. We are for electricity generation, the ocean is simply too deep for conventional foundation designs. motivated both by a desire to remain competitive in an ever-changing environment as well However, in order to harness the potential of wind energy more effectively, companies are as a passion to be a driving force of this change. Our innovation projects are dedicated to turning their efforts to concepts for floating wind turbines. The units are mounted on floating developing solutions that help us advance the utilisation of renewable energy, expand platforms made of steel or concrete, which are secured to the seabed using mooring lines electricity storage and become involved in large-scale hydrogen production. We also want and anchors. This opens up the possibility of deploying wind turbines in deeper waters, e. g. to help build a circular economy in which sensible use is made of carbon dioxide. coastal areas in Asia, the Americas and the Mediterranean region as well as in parts of the Our more than 964 patents and patent applications, based on about 241 inventions, speak are currently involved in three demonstration projects, researching the pros and cons of the volumes about RWE’s capability for innovation. The Group’s various activities in the field of various floating foundations. Our aim is to identify which technology is the most viable for North Sea. RWE has taken a leading role in the development of these new foundations. We research and development (R & D) are also testimony for this expertise. Last year, we worked the respective wind power initiative. on 196 R & D projects. Around 400 RWE employees were solely dedicated to these activities or contributed to them in addition to performing their normal tasks. Such ventures often The DemoSATH project is a partnership with Spanish company Saitec Offshore entail working with other companies or research institutions and we could not implement Technologies that aims to develop and construct a floating platform for a 2 MW wind many of these projects without their valuable insights. These collaborations are also financially turbine. The project relies on Saitec’s SATH (swinging around twin hull) technology, which is a advantageous, as costs are shouldered by many stakeholders. This limits operating R & D catamaran-like floating platform made of tensioned concrete elements. This design allows spending, which in 2021 amounted to €22 million (previous year: €20 million). the floating platform to rotate freely around a single point of mooring, depending on wind 30 RWE Annual Report 20211 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information and wave directions. We have commissioned a prototype, DemoSATH, which will be How we are improving the sustainability of wind power facilities. In essence, a wind assembled on a quayside in the port of Bilbao, in northern Spain. Once complete, tugs will turbine consists of a tower, a nacelle and three rotor blades. To ensure it doesn’t just produce move the floating wind turbine to a mooring point three kilometres from the Basque coast, green electricity but is also entirely environmentally friendly, a turbine should be completely where it will start generating electricity before the end of the year. recyclable once it reaches the end of its service life. Although tried-and-tested recycling The New England Aqua Ventus project is a collaboration with the University of Maine and when it comes to the rotor blades. These components are made using composite materials Diamond Offshore Wind, a subsidiary of Mitsubishi Corporation. The unit will feature a that are almost impossible to separate, due to the glass fibre-reinforced epoxy resin that technology developed by the University of Maine, where the floating platform consists of becomes completely solid once hardened. In a ground-breaking project, we are now helping modular concrete components with glued joints – a construction technique seen in bridges. to identify end-to-end recycling solutions at our Kaskasi wind farm, off the coast of We aim to have built an 11 MW prototype by 2024, which will be deployed in the Gulf of Heligoland. A number of the 38 wind turbines being erected there this year will be fitted with Maine on the eastern coast of the USA. This testing process will provide us with valuable special recyclable rotor blades. Our supplier Siemens Gamesa is manufacturing them using technical learnings, as well as helping us to understand how best to limit potential for friction a new type of resin with a chemical structure that allows for the different materials to be methods for the tower and components of the nacelle already exist, it’s a different story between the plant and local fisheries. separated, preserving their properties. This makes it possible to reuse the individual components once the rotor blade has reached the end of its lifetime. We will test these TetraSpar Demonstrator is our most advanced project. It is a collaboration with Shell, sustainable rotor blades in real-life settings over the coming years. Should they prove Japanese utility TEPCO and Danish company Stiesdal Offshore Technologies, and involves effective, then resin solutions of this nature could become standard for future RWE wind a floating platform comprising two sections that are cost-effectively prefabricated across farms. various locations. A keel below the platform is used to keep the steel top section stable in the water – similar to a ship. We assembled the sections in the Port of Grenaa in Denmark. How we are forging ahead with green hydrogen production. Zero-carbon hydrogen has A 3.6 MW wind turbine was then mounted on the floating platform. In summer 2021, we the potential to be used for multiple processes within the context of the energy transition. towed the structure to a test site 10 kilometres off the Norwegian coast, near Stavanger. Not only is it suitable for storing electricity, it could also be used to decarbonise industrial Once on site, it was attached to the seabed 200 metres below using mooring lines and processes and modes of transport that either cannot be electrified or where electrification anchor chains, before being connected to the Norwegian power grid. The floating turbine has proven to be prohibitively expensive or arduous. Most of our hydrogen projects focus on has been operating since November. We have fitted a number of sensors to measure decarbonising industrial applications. RWE is working with partners on around 30 such whether real-life performance matches up to forecasts created using calculations and initiatives with a geographical focus on Germany, the Netherlands and the United Kingdom. tests. Several have a good chance of being classified as ‘Important Projects of Common European Interest’ (IPCEI) by the EU. This means they would qualify for national subsidies. Our HyTechHafen Rostock project as well as parts of the GET H2 and AquaVentus collaborative initiatives backed by RWE all made it onto the shortlist of the Federal Ministry of Economics. In the following pages, we will take a closer look at the undertakings. 31 RWE Annual Report 20211 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information GET H2 was launched in 2019, making it one of the first hydrogen initiatives involving Our HyTechHafen Rostock project is dedicated to harnessing the potentials of the port of several industries in Germany. A host of companies and scientific institutions including RWE, Rostock as a promising location for the hydrogen economy, not least due to its industrial BASF, BP, Evonik, Nowega, OGE and ThyssenGas are participating in the project. GET H2 infrastructure. Together with our partners, port operator Rostock Port and energy providers spans the entire hydrogen value chain, from production and transport to industrial usage. RheinEnergie and EnBW, we will initially focus on constructing 100 MW of electrolysis The long-term objective is to build a nationwide hydrogen infrastructure in Germany. As part capacity. The unit will be built next to a power plant operated by RheinEnergie and EnBW in of the initiative, we joined forces with four partners at our Lingen power plant in 2020 to the vicinity of the port and the green hydrogen generated on site will be delivered to local launch the GET H2 Nukleus project. By 2026, three electrolysis plants are to be built on site, industrial customers via pipelines. Going forward, the infrastructure could also be used for each with a capacity of 100 MW. The aim is to use electrolysis technology on a larger scale road, rail and sea traffic. If the project stays on schedule and the framework is suitable, the to bring it to series production and unlock cost cutting potential. The green hydrogen port area could one day boast up to 1 GW of electrolysis capacity, as the site grows to produced in Lingen will be transported using repurposed natural gas pipelines to the become a hydrogen hub. northern Ruhr region, where it will be used in the BP refinery in Gelsenkirchen. This would form the heart of the public hydrogen infrastructure. The IPCEI funding application also How we are preparing to generate electricity with green hydrogen. The more we rely on envisages that the hydrogen grid be expanded towards Salzgitter, Duisburg, and the Netherlands. Furthermore, the first German H2 cavern storage facility is expected to be connected to the hydrogen grid in Gronau-Epe. wind and solar power for our electricity supply, the more crucial it will be to have ample energy storage facilities to ensure a reliable, weather-independent supply of electricity that satisfies demand. Battery-based solutions and green hydrogen for electricity generation are promising concepts. This is why we want to build flexible gas-fired power stations with a total Another initiative with substantial potential is AquaVentus. The idea behind it is to produce capacity of 2 GW as part of our ‘Growing Green’ strategy. In the long-term, the plants will run hydrogen at sea using electricity from offshore wind farms and transport it via pipelines to on green hydrogen, once supplies are sufficient. To improve the technical conditions for this, demand hotspots on land. The island of Heligoland will act as a hub. In a first step, the plan is we have joined forces with one of the world’s leading turbine manufacturers, Kawasaki to transport the hydrogen there via pipelines to cover demand on the island itself. Once Heavy Industries. The aim of this partnership is to trial a hydrogen-capable gas turbine. production volumes increase, hydrogen in ever greater volumes will then be forwarded to It is due to be built at our Lingen power plant, have a capacity of 34 MW and become the mainland, initially by tanker and later via a collector pipeline. Our AquaVentus partners include the island of Heligoland, Gascade, Gasunie, Shell and Siemens. A pilot project is being conducted to build two 14 MW wind turbines in the coastal waters of Heligoland and integrate an electrolyser in each of their bases. If the project stays on schedule, the turbines could become operational in 2026. But this is only the beginning. By 2035, electrolysers with a total capacity of 10 GW could be installed in the North Sea. This would be enough to produce up to 1 million metric tons of green hydrogen every year. operational in 2024. The turbine will be the largest gas turbine in the world that can be operated using 100 % H2. It would also be possible to use the turbine to co-fire natural gas and hydrogen in any desired ratio. This flexibility is a massive plus, for as long as the hydrogen industry is in its infancy, the average available volume of H2 will probably not suffice to exploit the turbine’s capacity to the desired extent. 32 RWE Annual Report 20211 To our investors 2 Combined review of  operations Innovation 3 Responsibility statement 4 Consolidated financial statements 5 Further information What we are doing to support carbon-neutral economic cycles. Many experts believe In mid-2021, we took a multi-fuel-conversion plant online in Niederaussem, which we that human intervention in the climate can only be limited effectively if the global economic intend to use to test whether phosphorus can be reclaimed from sewage sludge using system successfully makes the shift to closed carbon cycles. Ideally, only as much carbon enters the atmosphere, by way of greenhouse gas emissions such as CO2 or methane, as is bound by other processes at the same time. The transition to a circular carbon economy is high-temperature conversion. The process works as follows: by heating the sewage sludge to up to 1,500 degrees Celsius, we achieve gasification of the phosphorus, hydrogen and carbon contained therein. The phosphorus can then be separated from this gas and used a Herculean task, that hinges on innovation. For more than ten years now, RWE has been developing techniques that use CO2 in an ecologically meaningful way. Within the context of this work, we collaborate with universities and research institutes, with whom we seek to to produce fertiliser, for example. Additional process steps can then be taken to convert the remaining gas mixture of hydrogen and carbon back into chemical raw materials or fuels. We should have the first test results back by late-2022. However, the potential of the contribute to the creation of the necessary technical and systemic conditions for carbon- multi-fuel-conversion technology is by no means likely to be exhausted. In future, we also neutral economic cycles. want to apply this technology to other waste streams and biomass. A key process in transitioning to the circular carbon economy is thermal conversion. Here, Another project dedicated to the use of carbonaceous waste materials launched in June heat is applied to carbonaceous materials, converting them into synthesis gas, which largely 2021. The NRW-Revier-Power-to-BioJetFuel study we are conducting together with consists of hydrogen and carbon and can be used as a basic raw material in the production BP Europe and the Jülich Research Centre is assessing the prerequisites for manufacturing of fuels, plastics and fine chemicals. At the RWE Niederaussem Innovation Centre, we are carbon-neutral aviation fuel on an industrial scale. This research focuses on questions such dedicated to developing a high-temperature process to thermally convert different as: ‘What kind of regulatory framework is necessary to ensure the economic viability of plans materials, and thus reuse basic resources in manufacturing. We have partnered with the to operate a demonstration plant for deriving synthetic fuels from alternative carbon Fraunhofer Institute for Environmental, Safety and Energy Technology (Fraunhofer sources (e. g. sewage sludge, biomass or power plant flue gas) at an RWE site in the Rhenish UMSICHT) and Bochum Ruhr University for this purpose. region?’ We are also determining to what extent the resulting fuels could be further processed and used for industry in the Ruhr region. If the results are promising, project development for the construction of a demonstration plant could start as early as this year. 33 RWE Annual Report 2021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 All signs point to more stringent climate protection measures in Europe. Last year, the The European Commission specified the instruments that would be necessary to achieve its EU upped its greenhouse gas reduction goal for 2030 from 40 % to 55 %. The baseline new climate protection target for 2030 in the ‘Fit for 55’ legislative package. The package year is 1990. Germany has set its sights even higher: the largest economy in Europe has was made public on 14 July 2021, and includes proposals for a number of measures that increased its target from 55 % to 65 %. We welcome this change, as it encourages the will, for example, improve energy efficiency, cut carbon emissions in transport, construction rapid expansion of renewable energy. The economic environment also presents us with and agriculture, bring the taxation of energy products in line with current objectives, expand opportunities. Soaring natural gas and emission allowance prices have caused prices natural carbon sinks and cushion the social implications of climate protection. Renewables on electricity markets to skyrocket. This favours climate-friendly generation assets in are due to be scaled up rapidly and should cover at least 40 % of primary energy particular. Given that most of our power production had already been sold forward, the consumption in the EU by 2030. A goal which, until now, had been set at 32 %. Furthermore, increased price levels had little impact on our earnings in 2021. In 2022, however, we the Commission wants to adapt the EU Emissions Trading System (ETS). The aim here is to expect margins to improve notably. Regulatory environment decrease the total number of emission allowances placed on the market. At present, companies in the energy, industry and aviation sectors are participating in the ETS. In future, there is likely to be a similar system for heating and all other transport. In addition, the Commission plans to introduce a carbon border adjustment mechanism to ensure products manufactured in the EU are not subjected to higher carbon prices than imports. This is to Emission reduction target for 2030: EU adopts stricter benchmark of 55 %. The prevent domestic companies suffering a competitive disadvantage and thus relocating European climate law came into force on 29 July 2021, under which the EU and its member their production sites to countries outside the EU. The ‘Fit for 55’ package is being debated states are obligated to decrease their net greenhouse gas emissions to zero by 2050. There by member states and in the European Parliament. Draft laws have already been submitted had been some initial disagreement, in particular with regard to the emission reduction goal for most of the legislative initiatives. However, Parliament and the Council of Ministers are for 2030. The Commission had suggested an increase from 40 % to 55 % versus 1990. The expected to go through a lengthy process to establish their positions and reach an European Council (Council of Ministers) had also voted in favour of this change, while the agreement. European Parliament had backed a reduction of as much as 60 %. Following a number of trilateral meetings, representatives of the individual institutions ultimately agreed on 55 %. EU taxonomy: Commission defines conditions for ‘green’ economic activity. In a They also approved the formation of a panel known as the European Scientific Advisory delegated act published in mid-2021, the European Commission defined technical Board on Climate Change. The 15 senior scientific experts on this advisory board will be screening criteria to determine whether economic activity is mitigating or adapting to responsible for delivering a greenhouse gas budget, which can be used to determine an climate change. Most renewable energy assets are likely to meet the criteria. The act intermediate target for 2040. formalises the provisions of the Taxonomy Regulation, introduced by the European Parliament and the Council of Ministers in mid-2020. The Regulation is designed as a tool to help determine when to classify economic activity as sustainable. The EU is taking this stance to improve transparency for investors and channel capital flows into environmentally friendly activities. 34 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information To be recognised as taxonomy-aligned, an economic activity must contribute to at least one In the first year of reporting, companies are allowed to follow a simplified process, whereby of the following environmental objectives, without significantly harming any of the others: disclosure is limited to whether taxonomy criteria exist for a given economic activity and not (1) climate change mitigation, (2) climate change adaptation, (3) sustainable use and whether the applicable conditions for said activity have been met. Activities for which protection of water and marine resources, (4) transition to a circular economy, (5) pollution taxonomy criteria exist are classed as ‘taxonomy-eligible’. Up to 88 % of our capital prevention and control and (6) protection and restoration of biodiversity and ecosystems. expenditure in 2021 met this requirement. It should be noted that taxonomy-relevant The Commission’s first delegated act was concerned with defining the criteria for the first capital expenditure (€6.0 billion) is not defined in the same way as the figure shown on two objectives, with the remaining targets to be delivered over the course of the coming year. pages 58 et seq. (€3.8 billion) and also cover, for example, additions from mergers of companies. In the past year, 18 % of revenue (€24.5 billion) was taxonomy-eligible along In February 2022, the Commission passed a supplementary delegated act which formalises with 25 % of operational expenditure (€1.6 billion). From 1 January 2023, we will report what the taxonomy criteria for new gas and nuclear power stations. It states that gas-fired power percentage of our economic activities actually meet the technical screening criteria and is plants which are approved before 2030, can be classed as sustainable even if they exceed the upper emissions limit of 100 g CO2 / kWh, provided they replace more carbon-intensive assets and are fully operated using climate-friendly gases like hydrogen no later than 2036. There will also be a cap on CO2 emissions. The act mentions two upper limits, of which one has to be complied with, namely 270 g CO2 / kWh or – alternatively – 550 kg CO2 / kW as an annual average over a period of 20 years. The standards imposed are ambitious, but can thus considered ‘taxonomy-aligned’. We have set ourselves the target of ensuring that more than 90 % of our investments are dedicated to such activities in future. New climate law: Germany seeks to become carbon neutral by 2045. On 24 June 2021, the German Upper House passed a reform of the climate law, imposing a stricter greenhouse gas reduction target, which was greenlit by the Lower House one day later. be met given the right framework conditions. These include the rapid expansion of hydrogen Germany has now set its sights firmly on being carbon neutral by 2045 – five years ahead infrastructure. The delegated act does not require formal approval from the European of the climate law’s original schedule, drawn up in 2019. By 2030, greenhouse gas Parliament or Council of Ministers. However, both authorities have veto powers: they can emissions are to be reduced by 65 % compared to 1990. The original target was 55 %. It is reject an act entirely within six months of its passage by the Commission. also the first time that an emission reduction target for 2040 has been set: it amounts to The Taxonomy Regulation has also introduced new transparency obligations. Players on shouldering the majority of additional emissions cuts: in 2030, the sector is limited to the financial market, e. g. investment funds that label a financial product as environmentally emitting 108 million metric tons of carbon. The original emissions threshold had been set at 88 %. The law also specifies targets for individual sectors, with the energy industry sustainable, now have to disclose the share of green assets in their portfolio. Listed companies 175 million metric tons. will also have to observe stricter disclosure requirements. Under the new requirements, businesses that are already obliged to prepare non-financial reports will now have to disclose These legislative amendments were seen as a reaction to a decision handed down by the what percentage of their capital expenditure, revenue and operational expenditure are German Constitutional Court and published in April 2021. The judges in Karlsruhe had classed as sustainable in accordance with EU taxonomy regulations. This obligation applies found the Climate Protection Act of 2019 to be insufficient and had called for more to all annual reports published on or after 1 January 2022. concrete regulations for the period after 2030. They highlighted the enormous burden that irreversibly delaying considerable emission reductions would place on future generations. 35 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information How exactly these additional emission reductions will be achieved is now down to the new United Kingdom launches national emissions trading system. The new British trading government coalition between Germany’s Social Democrats, Greens and Free Democrats. system for carbon emission allowances entered into force in early 2021. On 19 May, the A range of measures have already been announced, such as further expediting the phaseout first 6.1 million certificates (UK Allowances, or UKAs for short) were auctioned off, each of coal, which is ideally to be achieved by 2030. The German government is also looking to entitling the holder to emit one metric ton of carbon. At £44 (€51), the price was twice as move up a gear in other areas, including expanding renewable capacities and scaling up the high as the lower regulatory limit. Additional auctions followed every two weeks. In 2021, hydrogen economy. around 83 million emission allowances were auctioned off in total, and around 38 million were allocated free of charge. The UK sought to establish its own emissions trading system Germany imposes stricter emissions limits for air pollutants. At the eleventh hour, as a result of leaving the EU. Britain has not participated in European emissions trading Germany transposed the new EU requirements for limiting air pollutant emissions from power plants into national law. Midway through 2021, an amendment to the 13th German Emission Control Act and new co-firing requirements in the 17th German Emission Control since the end of 2020. Until now, both systems have been kept strictly separate, i. e. it has not been possible to use EU Allowances (EUAs) in the UK nor has using UKAs been permissible in the EU. This can give rise to price discrepancies (see page 38). In addition to Act entered into force, introducing more stringent limits on nitrogen oxides and mercury, in a number of renewable energy assets, our UK power generation portfolio includes ten particular. To ensure compliance, we have optimised the nitrogen oxide reduction processes gas-fired power plants with a total capacity of 7 GW. The carbon emitted by these facilities in all our lignite-fired power plants and equipped our three most state-of-the-art units with amounted to 12.8 million metric tons in 2021. additional mercury removal systems. Gas-fired stations are also affected by the stricter regulations. Existing plants and those under construction are marginally compliant with the Netherlands limits use of coal in power plants. The Dutch parliament and senate have current nitrogen oxide thresholds, without having to rely on retrofits. However, future power passed an amendment to the country’s legislation on the Coal Phaseout Act, which places stations must be fitted with catalytic exhaust gas purification systems, which will increase costs significantly. German government establishes new system for nuclear phaseout compensation. The 18th Amendment to the German Nuclear Energy Act entered into force on 31 October additional restrictions on the use of coal for electricity generation. Under the new law, annual CO2 emissions from coal use may in future not exceed 35 % of the level that is theoretically possible in the respective plant. The regulation will apply from 2022 to 2024. Plant operators are to be compensated, however this is yet to be approved under state aid law by the EU Commission. RWE operates two hard coal power plants in the Netherlands, 2021. It governs remuneration for German nuclear power plant operators impacted by the Amer 9 and Eemshaven. Amer 9 runs on 80 % biomass and is therefore not affected by the accelerated nuclear phaseout. RWE was entitled to €880 million in compensation. We upper limit. Eemshaven, on the other hand, will be severely impacted by the law as it only received the funds at the end of November. It had been necessary to readdress the issue of uses 15 % biomass. remuneration in light of the German Constitutional Court’s findings that the regulations drawn up in 2018 had never entered into force and were, moreover, unconstitutional. We provided additional context on this matter on page 39 of the 2020 Annual Report. The new law is flanked by an associated public-law contract between the Federal Republic of Germany and the power plant operators, which was signed by the contracting parties in March 2021. 36 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information Poland establishes funding framework for offshore wind. The Polish government has finalised the legal framework for offshore wind farm subsidies, with the Polish parliament Market environment passing a corresponding law in January 2021. Poland intends to increase the share of Strong economic output in all of RWE’s core markets. In 2021, global output made a renewables in its power generation portfolio to 32 % in 2030; in 2020 this figure stood at strong recovery, following the economic downturn witnessed during the pandemic. Initial 16 %. At the moment, there are no wind farms off the coast of Poland. However, turbines estimates put increased economic performance at 6 % year on year. While the USA saw a with a total capacity of 10.9 GW should be in development, under construction or in similar level of growth, the Eurozone fell behind by approximately one percentage point. In operation by as early as 2027. Wind farms with a total capacity of 5.9 GW will be able to Germany and the Netherlands, our two most important markets within the currency union, take part in the first round of subsidies. Plant operators will be awarded contracts for current data suggests a rise of 3 % and 5 %, respectively. The UK economy is centred around difference which guarantee a fixed payment for 100,000 full load hours. The maximum the service industry and was therefore hit much harder by the pandemic. However, figures subsidy period is set at 25 years. RWE succeeded in securing a contract of this nature for suggest the nation’s economy could have since rebounded by 7 %. The global economic its F. E. W. Baltic II project, on which we report in detail on page 41. recovery was reflected in the significant rise in demand for commodities, which led to a notable increase in prices. There were also supply shortages and project delays, which have The US government plans to extend tax benefits for renewables. Shortly after his only affected RWE to a minimal extent so far. inauguration, US president Joe Biden presented an ambitious investment package to subsidise infrastructure, social care and climate protection initiatives, which envisages an German power consumption up by 3 % versus prior year. In the past year, demand for extension to renewables tax benefits. New power stations are to continue to receive electricity has risen across all RWE markets. This was largely attributable to the economic Production Tax Credits (PTCs) or Investment Tax Credits (ITCs). The aim is to grant PTCs in upswing. Preliminary data from the German Association of Energy and Water Industries the amount of US$25 per MWh for a period of ten years, while ITCs are to account for up (BDEW) indicates that German electricity consumption was up 3 % on 2020. For the USA, to 30 % of the investment costs. In future, it should be possible to subsidise hydrogen and experts estimate a rise of similar proportions, while the Netherlands (1 %) and the UK (2 %), electricity storage projects in addition to wind power and solar systems. will most likely have fallen short of this mark. Before it is enshrined in law, the investment package must first pass through the Senate Low wind speeds across the majority of RWE locations. Utilisation and profitability of and the House of Representatives. The Democrats hold the necessary majorities in both renewables assets are largely weather-dependent. This is why we monitor wind speeds houses. In November, the House of Representatives greenlit the proposal. One single carefully. In 2021, these were lower than the long-term average across most of our Democratic senator, however, has so far prevented it from passing through the Senate. production sites in Europe and North America. A year-on-year comparison also revealed an Points of contention include the overall cost of the package and individual social measures. unfavourable development: most RWE wind farms were underutilised versus 2020 due to Commentators expect a new package to be tabled, which includes tax incentives for weather conditions. Only pockets of southern Europe were able to benefit from higher investing in climate protection and is capable of achieving a majority in both houses. wind volumes. The utilisation of run-of-river power stations depends on precipitation and However, time is of the essence here given the pending Senate elections in November 2022. melt water volumes. In Germany, where most of the RWE Group’s hydroelectric plants are Should the Democrats lose their narrow majority, then the Republicans could block located, these volumes were a little below the long-term average. They were, however, legislative proposals from the US government. higher than in 2020. 37 RWE Annual Report 2021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 Onshore Offshore Increased demand from China boosts hard coal prices. Prices for hard coal used in power 2021 2020 2021 2020 plants (steam coal) also rose notably in the year under review. Deliveries to ARA ports % Germany United Kingdom Netherlands Poland Spain Italy Sweden USA 17 27 30 27 24 24 29 32 20 34 30 29 23 21 33 33 35 35 – – – – 47 – 40 42 – – – – 56 – (ARA = Amsterdam, Rotterdam, Antwerp) including freight and insurance were settled for an average of US$122 / metric ton (€104) in 2021, as opposed to US$50 / metric ton the previous year. This notable rise can, in part, be traced back to increased demand from China, where the local economy recovered quickly from the economic fallout of the pandemic. The same trend was also reflected in the development of hard coal forward prices: in the year under review, the 2022 forward (API 2 Index) was quoted at an average of US$95 / metric ton (€81). This is US$37 more than was paid for the 2021 forward in 2020. CO2 emissions trading: More ambitious EU climate protection target pushes prices up. An increasingly important price factor for fossil fuel-fired power plants is the procurement of CO2 emission allowances. An EU Allowance (EUA), entitling the holder to emit one metric ton of carbon dioxide, was traded at an average of €54 in 2021 – almost twice the price in Natural gas prices skyrocket. The utilisation and earnings of our conventional power plants are heavily dependent on how electricity, fuel and emission allowance markets 2020. This figure is based on contracts for delivery that mature in December of the perform. Natural gas, our most important energy source for producing electricity, became following year. Once the EUA price curve had exceeded €30 in late 2020, there was only increasingly expensive in the year under review. In the first quarter of 2021, quotations at one way things could go, and that was up. As 2021 drew to a close, allowance prices were the Dutch Title Transfer Facility (TTF), Continental Europe’s lead market, were still largely already closing in on the €80 figure. The considerable price hikes were primarily the result of priced between €15 / MWh and €20 / MWh, but by the fourth quarter they intermittently the introduction of a stricter European greenhouse gas reduction target for 2030. To meet exceeded levels far above €100. In 2021, the average spot price of €48 / MWh was more this goal, the EU needs to vastly decrease the number of emission allowances available to than five times as high as in 2020 (€9 / MWh). This drastic price hike for natural gas is companies. Many market participants anticipated this, making early purchases of EUAs. partially attributable to increased demand for energy due to the global economic upturn. In The increase in energy consumption driven by the economy contributed to the rise in prices addition, colder weather across large parts of Europe meant that more gas was needed for because it also drove up greenhouse gas emissions and demand for emission allowances. heating compared to 2020. Geopolitical tensions and uncertainty surrounding the approval of the Russian-German Nord Stream 2 gas pipeline contributed to the price increase. Due to the aforementioned factors, forward quotations rose considerably. The 2022 As explained on page 36, the United Kingdom launched its own CO2 emissions trading system when it left the EU. UK Allowances (UKAs) have been traded on the secondary forward hit a record high of well above €100 / MWh in December. On average, it was quoted market since the first auction in May 2021. In the seven and a half months to the end of the at €34 / MWh. By way of comparison, in the previous year the 2021 TTF forward cost year, UKAs were quoted above EUAs. The average price during this time was £57 (€67). €13 / MWh on average. 38 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business environment 3 Responsibility statement 4 Consolidated financial statements 5 Further information Surge in fuel and emissions allowance prices impacts cost of electricity. The incredible Higher margins on electricity forward markets. In order to mitigate the risk of short-term rise in the price of fuel and emission allowances shaped the trajectory of our most important sales and price fluctuations, we sell most of our electricity forward, whilst also hedging the wholesale electricity markets in Europe. The low wind energy output, due to poor weather, prices for necessary fuels and emission allowances. Our revenue for the period under review and maintenance-related outages at French nuclear power plants also came to bear to was thus influenced by the conditions of forward contracts for 2021, which were concluded some extent. In Germany, the average annual spot price for base-load electricity more in previous years. These forward sales are largely conducted with a lead time of up to three than tripled compared to 2020, rising from €30 / MWh to €97 / MWh. The changes were on years for power production in our lignite and nuclear plants, which are mainly used to cover a similar scale in the United Kingdom and the Netherlands, where quotations rose from base-load needs. On average, we were able to achieve higher prices and margins from £35 / MWh to £118 / MWh (€138) and from €32 / MWh to €103 / MWh, respectively. these assets for 2021 than for 2020. Sales of electricity from our gas-fired stations were Electricity forward markets also witnessed a drastic upward curve. An average of €89 / MWh subject to a shorter lead time. Margins realised from these transactions were higher than was paid for the 2022 base-load forward in Germany and the Netherlands. In the preceding the previous year. A portion of our renewables portfolio is also subject to forward contracts. year, this figure stood at €40 in both countries. The price of the British one-year forward increased from £44 / MWh to £92 / MWh (€108). We do, however, still sell some of the generated power at spot market prices valid at the time Once-in-a-century snowstorm sees electricity spot prices in Texas hit record high. The Furthermore, price spikes on the spot market contributed to additional income from the North American electricity market is geographically divided into multiple sub-systems, each short-term optimisation of our power plant dispatch. of which is governed by an independent system operator. The most important market region for RWE is Texas, where most of our wind farms in the USA are connected to the grid and the The rise in the price of electricity will have a more notable impact on margins in 2022. This system operator is the Electric Reliability Council of Texas (ERCOT). Spot prices on the concerns generation assets that had not yet fully or had only partially sold their electricity ERCOT market briefly peaked at US$9,000 / MWh in February 2021 due to supply forward when prices began to climb. European wind farms, in particular, where electricity shortages and regulatory interventions. This was due to an exceptionally harsh cold spell, revenue depends on market prices, now enjoy improved earnings forecasts. However, a which led to outages at several power plants. Electricity forward prices saw no long-term portion of our conventional power plant portfolio also stands to benefit from the price trend. of sale. The margins we achieved for these transactions were higher than in 2020. effects from this event. Last year, a one-year forward contract in the ERCOT market cost on average US$37 / MWh (€31), US$7 more than in 2020. Higher natural gas prices were decisive in this regard. The more moderate electricity price level compared to Europe can be explained by the fact that gas prices in the USA remain relatively low, despite the recent hike. In addition, Texan electricity producers do not need to purchase carbon emission allowances. 39 RWE Annual Report 2021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 In 2021, we showed just how committed we are to green growth. We secured the The Crown Estate’s tender process allocated development rights to a total of six sites on rights to build and operate offshore wind projects in the United Kingdom, Denmark, which offshore wind farms with a total capacity of up to 7,980 MW can be built. A number of Poland and Germany with a capacity of up to 5 GW. Furthermore, we forged strong the participants, which also secured option rights, submitted significantly higher bids than partnerships for joint wind and solar activities in new markets. In the hydrogen us. RWE will pay the lowest average annual option fee per megawatt of all successful business, we formalised a partnership with Shell, which we expect to deliver substantial bidders. synergies. RWE’s green transition strategy comprises the phaseout of coal-fired power. Here too, we took massive strides in 2021 by decommissioning our two remaining Danish Energy Agency awards large offshore wind project to RWE. In Denmark, we have German hard coal-fired power stations and five lignite units. In this chapter, we present been granted the rights to build and operate the Thor offshore wind project in the North the main events that took place in 2021 and the beginning of 2022, focusing on those Sea. We had taken part in an auction along with five other bidders: all participants which are not outlined in more detail elsewhere in the review of operations. submitted minimum bids of DKK 0.1 / MWh. On 1 December 2021, we won the auction and Events in the fiscal year shortly afterwards signed a concession agreement with the Danish Energy Agency, which entitles us to build the wind farm and operate it for 30 years. Thor will be constructed about 20 kilometres off the coast of west Denmark and will be the country’s largest offshore wind farm to date, with a capacity of approximately 1,000 MW. It is scheduled for full RWE wins rights to develop new offshore wind power sites in the British North Sea. commissioning in 2027. Due to our minimum bid, we will not receive state subsidies for the At an auction held in February 2021, RWE secured the rights to build wind turbines with electricity generated by Thor. In the early years, we will have to transfer our proceeds to the a total capacity of 3,000 MW across two neighbouring locations in the UK North Sea. In Danish government until they total DKK 2.8 billion (€377 million) plus annual inflation. We return, we will pay an annual option fee of £82,552 / MW (plus inflation adjustment) until expect our investment for the wind farm and the grid connection to amount to €2.1 billion. we make a final investment decision. The area is situated on a sandbank in shallow waters In Denmark, RWE already operates the Rødsand 2 offshore wind farm, which is located known as Dogger Bank. The Sofia wind farm is also being built in the vicinity. After the south of the island of Lolland and has an installed capacity of 207 MW. auction, an official plan-level Habitats Regulations Assessment (HRA) was initiated, which is expected to be finalised in 2022. Only after this is completed will the option fee period commence. In accordance with applicable regulations, however, we had to pay an annual fee in advance in 2021. As soon as all permits for the new wind farms have been obtained, we will participate in an auction for a subsidy contract, after which we will make a final investment decision. Then the option fee will be replaced by a much lower lease payment. If connected to the grid in time, the wind farms could be commissioned as early as the end of this decade. 40 RWE Annual Report 20211 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE secures two offshore wind farm sites in the German North Sea. In Germany too, we RWE becomes majority shareholder in Rampion offshore wind farm. As of 1 April 2021, laid the groundwork for new offshore wind farms. Last year, we secured the usage rights to we acquired a 20 % interest in the UK Rampion offshore wind farm from E.ON. The purchase two sites in the German North Sea. We were allocated one of the sites, officially referred to price was paid in December 2020. As a result of the transaction, we now own 50.1 % of the as N-3.7, during an auction held by the German Network Agency in September 2021. This 400 MW wind farm and can consolidate it fully. The other owners are a consortium led by confers us the right to build a wind farm on site with a capacity of 225 MW. To give us the Macquarie (25 %) and Canadian energy group Enbridge (24.9 %). Rampion is located in the best chance of winning the auction, we submitted a zero-cent bid, which means the English Channel off the coast of Sussex and has been operating commercially since 2018. electricity generated by the wind farm is not subject to a minimum price guaranteed by the state. We were granted usage rights to the second site, referred to as N-3.8, following the TCP investor consortium acquires Rampion’s grid connection. In November, investor September auction, allowing us to build a wind farm with an installed capacity of 433 MW. consortium Transmission Capital Partners (TCP) purchased Rampion’s grid connection, for Originally, the winning bid had been placed by French energy group EDF, but it had to pass which it paid a total of £279.5 million. The transaction included the offshore and onshore on the usage rights to a joint venture between Northland Power and RWE. This is because export cables as well as the substations at sea and on land. The sale was a regulatory we had pre-developed the site together with our Canadian partner and therefore had a requirement. In the United Kingdom, construction of offshore wind farms and the associated step-in right. Now we must deliver the project at the conditions in EDF’s winning bid; the grid connection is managed under one umbrella. The grid connection must subsequently be company submitted a zero-cent bid. sold to an independent third party under the supervision of UK regulator Ofgem. Support secured for offshore wind project in Poland. We have also made good progress Go-ahead for construction of Sofia wind farm in the North Sea. In the spring of 2021, in relation to our first wind energy project in the Polish Baltic Sea. In April 2021, the RWE made the final investment decision to build the Sofia wind farm in the UK North Sea, government in Warsaw made a preliminary commitment to subsidise our F. E. W. Baltic II one of the largest offshore wind projects in the world. We hold a 100 % stake in the project. project. It is envisaged that the wind farm be built on the Słupsk sandbank and have a Sofia will be located almost 200 kilometres off the coast of North East England. It will capacity of 350 MW. It was not until January 2021 that the Polish government established consist of 100 turbines with a total installed capacity of 1,400 MW, and will be capable of the legal framework for subsidising offshore wind power. We were granted environmental supplying green electricity to approximately 1.2 million homes in the UK. June 2021 saw the clearance for F. E. W. Baltic II in December and will receive the final subsidy approval in 2022, start of onshore construction, with offshore work scheduled to begin in 2023. According to at which time the regulator will also decide on the level of the funding. The support will be current plans, Sofia is set to take its full capacity online by 2026. We will be contractually granted in the form of two-sided contracts for difference which guarantee that we receive a remunerated for electricity generated by the wind farm in the amount of £39.65 / MWh. This fixed price per megawatt hour for the generation volume of 100,000 full load hours. If the amount is based on the 2012 price level and will be subject to an upward adjustment for realised market price is lower than this amount, the state pays the difference. If it is higher, inflation. We anticipate investing about £3 billion in Sofia. This includes expenditure for the the operators are obliged to make a payment. The subsidy period is limited to 25 years. grid connection, which we will sell on completion. 41 RWE Annual Report 20211 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information Alliances to expand offshore wind forged. We have joined forces with foreign partners to Three major US wind farms start commercial operation. We completed three onshore improve our growth opportunities in the offshore wind business. The following is a brief wind projects in the USA in 2021. In the spring, Scioto Ridge went online commercially after overview of some of the most recent collaborations. about two-and-a-half years of construction. It is our first wind farm in the state of Ohio and • In May 2021, we agreed with UK-based National Grid Ventures that we would jointly farms: West Raymond in Texas and Cassadaga in the US state of New York. The wind farms participate in the New York Bight seabed lease auctions. In February 2022, we secured a have capacities of 240 MW and 125 MW, respectively. A total of more than €800 million site in a tender process with the potential for about 3 GW in generation capacity was invested in the three projects. has a total capacity of 250 MW. In the summer, we completed two further large-scale wind (see page 45). • Also in May, we signed an agreement with Equinor and Hydro to develop a wind energy our generation portfolio, we sold shares in four Texan wind farms: Stella (201 MW), Cranell project in the Sørlige Nordsjø II area in the Norwegian North Sea. The site neighbours (220 MW), East Raymond (200 MW), and West Raymond, which was mentioned earlier. The Danish waters and has excellent wind conditions. The favourable location should allow us buyers are a subsidiary of Canadian energy utility Algonquin Power & Utilities and UK to sell electricity both within and outside of Norway. investor Greencoat, which took an interest of 51 % and 24 % in the wind farms. RWE is therefore only a minority shareholder but is staying on as the operator of these assets. We • In September, we forged a further alliance with Norwegian partners. Together with NTE no longer fully consolidate them in our financial reporting and instead account for them and Havfram, we plan to participate in auctions for floating wind farms. The Norwegian using the equity method. The sale was agreed in December 2020 and was completed in Ministry of Petroleum and Energy has earmarked an area known as Utsira Nord off the January (Stella / Cranell / East Raymond) and August 2021 (West Raymond). Stakes in four Texan wind farms sold. To increase our financial strength and better balance country’s southern coast for this purpose. The site can accommodate wind turbines with a total capacity of up to 1.5 GW. Australian Limondale solar farm is officially connected to the grid. In autumn 2021, our Limondale solar farm went online in the Australian state of New South Wales. With • Floating wind farms are also the focus of a partnership in South Korea, which we finalised a capacity of 249 MW, the photovoltaic system is one of the largest in the country. It with the port city of Ulsan in November. Together with our local partner, our objective is to consists of approximately 872,000 solar panels, spread over a 900-hectare site. implement projects to create up to 1.5 GW in generation capacity off the coast of the Construction started in 2018. Our capital expenditure on Limondale amounted to country. South Korea is aiming for 12 GW in offshore wind capacity by 2030 and wants to approximately €330 million. be climate neutral by 2050. • In February 2022 we joined forces with Tata Power, India’s largest power generator, to develop offshore wind projects along the country’s 7,600-kilometre coastline. India has also set ambitious renewables expansion targets, and aims to have 30 GW in offshore capacity by 2030. 42 RWE Annual Report 20211 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE sets the stage to expand solar power in Greece. In October, we set up a joint venture Partnership with Shell on hydrogen projects. In November, we reached an agreement with with energy group Public Power Corporation (PPC) to realise solar projects in Greece. RWE Shell to intensify our collaborative efforts to build a European hydrogen economy. Working and PPC own 51 % and 49 % of the new company, respectively. Our partner is the country’s together with the British energy group, we will develop projects to produce, use and sell largest power utility and will contribute photovoltaic projects with up to 940 MW of capacity hydrogen. RWE and Shell are already partners in the trailblazing hydrogen projects to the joint venture. RWE will bring a project pipeline of a similar size to the table. The AquaVentus in Germany (see page 32) and NortH2 in the Netherlands. RWE and Shell undertakings are in various stages of development. Based on current plans, the first farms intend to take the next step and initiate large-scale projects in the United Kingdom for will be commissioned in 2023. the production of green hydrogen using offshore wind energy. The partnership also encompasses measures to decarbonise gas and biomass-fired power stations within the Belectric Group solar services business sold. In December, the Dutch energy service RWE Group. To this end, we will explore the following alternatives: carbon capture and provider Elevion acquired parts of the Belectric Group from RWE. Assets affected by the storage as well as retrofitting stations to use environmentally friendly hydrogen. transaction were companies in Europe and Israel which provide services relating to the construction, operation and maintenance of solar farms. Elevion is part of ČEZ, the Czech Success in British capacity market auction. In March 2021, RWE assets totalling Republic’s largest energy utility. Belectric’s battery business remains within the RWE Group. 6,544 MW in secured generation capacity – primarily gas-fired power stations – qualified It was transferred to RWE Battery Solutions in 2020. for a payment at a capacity market auction in Great Britain. The bidding process related to the period from 1 October 2024 to 30 September 2025. Stations with a total capacity of RWE sells small hydropower plants to KELAG. Austrian energy utility KELAG acquired 40.8 GW won a contract. These assets will be remunerated for being online and contributing twelve French and seven Portuguese hydro assets from us, which have a total installed to electricity supply in the aforementioned period. The auction cleared at £18.00 / kW (plus capacity of 62 MW (RWE’s pro-rata share). We also sold a number of small wind turbines inflation adjustment). in Portugal with a combined capacity of 3 MW to KELAG. A corresponding agreement was reached at the end of 2020. We transferred the French plants in April 2021, and the Once-in-a-century Texan cold snap weighs heavily on earnings. In February 2021, Portuguese assets followed in September. KELAG is a leading hydropower producer. an extraordinary cold front in parts of the USA curtailed energy supply substantially (see We currently hold a 37.9 % stake in the company. page 39). Winter storms and freezing rain forced RWE wind farms to go offline for several Green light for the construction of two mega batteries in Germany. We will contribute to conduct short-term spot purchases in order to meet our supply obligations. Due to the tight safeguarding security of supply in the future with two high-capacity batteries at our power supply situation and regulatory price interventions, we had to pay up to US$9,000 / MWh for plant sites in Werne and Lingen. This decision was taken in June. We expect the battery these electricity purchases. This reduced the adjusted EBITDA in the Onshore Wind / Solar storage units to have outputs of 72 MW (Werne) and 45 MW (Lingen) as well as storage segment by approximately €400 million. days. We had sold forward a portion of the generation of these assets and therefore had to capacities of 79 MWh and 49 MWh, respectively. They are due to go online at the end of 2022. We intend to invest some €50 million in total. 43 RWE Annual Report 20211 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information Group sites affected by catastrophic floods in western Germany. In mid-July, severe Further lignite-fired power stations taken offline. During the year under review we closed weather events in parts of Germany led to disastrous floods resulting in a large number of five 300 MW power plant units in the Rhenish lignite mining region. To comply with the fatalities and substantial damage to property. Rhineland-Palatinate and the south of North German Coal Phaseout Act, we took Neurath B (294 MW), Niederaussem C (295 MW) and Rhine-Westphalia were the most devastated regions. The extreme weather also affected Weisweiler E (321 MW) offline at the end of December. The Frimmersdorf lignite power plant our company and its employees. In the Rhenish lignite mining area, water ingress at the was shut down three months earlier. The station’s last two units P (284 MW) and Q (278 MW) Inden opencast mine brought production to a temporary halt. We are deeply saddened that had been placed on security stand-by on 1 October 2017. This meant that they were an employee of a partner company was swept away in the floods and could not be saved forbidden by law from participating in the market, but had to remain available as a despite a major rescue operation. In Erftstadt-Blessem, located near Cologne, the Erft river safeguard to ensure security of supply when necessary. They were shut down for good on burst its banks, flooding a gravel pit operated by a subsidiary of RWE Power. Nearly all expiry of the security stand-by period. Most employees affected by the lignite exit will retire. RWE-operated run-of-river power plants in the Eifel and on the Mosel, Saar and Ruhr rivers Younger staff members will transfer to other areas within the Group or will receive severance were forced to interrupt operations due to the floodwaters. Within a few days, however, packages. these stations and the Inden mines were available once more. Our financial burdens resulting from the disastrous flooding will total a figure in the low two-digit million euro Gundremmingen C nuclear power station stops operating. Also at the end of 2021, range. RWE provided about €2 million to an emergency relief programme, one quarter of we took Unit C of the Gundremmingen nuclear power plant offline. The plant was which was donated by our staff. commissioned in 1984 and had a net installed capacity of 1,288 MW. Its closure and current dismantling are a result of the roadmap dictated by the German nuclear phaseout. RWE stops generating electricity from hard coal in Germany. In the middle of last year, We took Unit B of the Gundremmingen nuclear power station offline at the end of 2017. our last German hard coal units, Westfalen E at Hamm (764 MW) and Ibbenbüren B (794 MW), Now electricity generation at the site has stopped entirely. About 540 people were working were closed for good. At the end of 2020, we successfully participated in the first nationwide there as of 31 December 2021. This number will likely drop to about 440 by the end of shutdown auction for hard coal-fired power plants with these assets. We received €216 million 2022. We will implement further socially acceptable redundancies in the years thereafter. in compensation for their early decommissioning. In the first half of 2021, we were forbidden from selling electricity generated by these assets, but were obligated to keep them on standby to ensure security of supply. During this period, Westfalen E went online 13 times at the request of the transmission system operator. The station is envisaged to continue to contribute to security of supply, albeit without using hard coal. As the German Network Agency has classified the power plant as system-relevant, we will convert the generator to a rotary phase shifter to produce reactive power to maintain voltage levels, an important element in stabilising the electricity grid. Conversely, Ibbenbüren B has not been deemed to be system-relevant and will be fully decommissioned. 44 RWE Annual Report 20211 To our investors 2 Combined review of  operations Major events 3 Responsibility statement 4 Consolidated financial statements 5 Further information Events after the close of the fiscal year RWE enters US offshore wind market. At the end of February 2022, we were successful in RWE once again successful in British capacity market auctions. Another auction, relating an auction of seabed leases for offshore wind sites in the New York Bight. A joint venture to the delivery period from 1 October 2025 to 30 September 2026, was held for the British between RWE and National Grid Ventures secured an area for US$1.1 billion. About 3 GW of capacity market on 22 February. We secured a payment for all participating RWE power generation capacity can be built at the site, which would be capable of producing enough stations, including two small new-builds. Altogether, these assets have a secured capacity of electricity to power 1.1 million US homes. The auction included six lease sites, with bidders 6,647 MW. At £30.59 / kW per annum (plus inflation adjustment). A total of 42.4 GW in only being allowed to secure one each. Every successful bid conferred the right to develop a generation capacity qualified for a payment at the auction. site and participate in upcoming offtake auctions in the states of New York and New Jersey. If the project progresses as planned, our offshore wind farm in the New York Bight will be Huge uncertainty after Russia attacks Ukraine. Russian troops marched into Ukraine at commissioned before the end of the decade. the end of February. As an invasion under international law, it prompted outrage and consternation around the globe. Many countries including the USA, EU member states and Wind joint venture with Northland Power launched. In January 2022, RWE and Northland the United Kingdom imposed economic sanctions on Russia. Uncertainty concerning Power formed a joint venture for the development of wind energy projects in the German commodity deliveries from Russia to Europe has caused a significant increase in gas and North Sea. We expect this partnership to deliver substantial synergies, resulting in cost electricity trading quotations. In some European countries, including Germany, governments savings in the development, construction and operation of the assets. RWE owns 51 % and are working on measures to reduce dependency on Russian oil and gas imports. When this our Canadian partner owns 49 % of the joint venture, which encompasses three offshore review of operations was prepared in early March 2022, it was impossible to predict the wind projects aiming to develop a total capacity of 1.3 GW. The sites of the future wind development of the Ukraine conflict or its consequences. Although RWE does not have farms are located north of the island of Juist. Before forging the joint venture, we had business activities in Russia or Ukraine, further escalation of the conflict and discontinuation already worked with Northland Power on two of the three projects. One project is focused on of supply relationships with Russian companies could have notable effects on our assets, a 433 MW wind farm on a site officially called N-3.8, which we secured via a step-in right liabilities, financial position and profit or loss. More detailed information can be found in the following an invitation to tender in 2021 (see page 41). The other initiative involved the chapter entitled ‘Development of risks and opportunities’, which starts on page 70. construction and operation of a 420 MW wind farm, which we hope to build on the N-3.5 site. We also have a step-in right for this area, but have not exercised it yet. RWE initially only held a 15 % share of both projects and had originally developed the third joint venture project alone. It is centred around a 480 MW wind farm at the N-3.6 site, for which we also hold a step-in right which has not yet been made use of. The auctions for the sites N-3.5 and N-3.6 should be held in 2023. In the event that other companies are successful, we can exercise our step-in rights. 45 RWE Annual Report 20211 To our investors 2 Combined review of  operations Commentary on reporting 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.5 Commentary on reporting In our financial reporting, the RWE Group is broken down into five segments, which we • Supply & Trading: Proprietary trading of energy commodities is at the core of this present in detail in this chapter. Renewable energy, gas-fired power plants, energy segment and is overseen by RWE Supply & Trading. The company also acts as an storage, our hydrogen business and energy trading are distributed among the first four intermediary for gas, supplies key accounts with energy, and undertakes a number of segments. They play a key role in the energy transition and therefore make up our core additional trading-related activities. Our German and Czech gas storage facilities also business. The fifth segment covers power generation from coal and nuclear energy, form part of this segment. which will increasingly lose importance due to legally mandated phaseout roadmaps. • Coal / Nuclear: This is where we report on the activities which are not part of our core business as their importance is declining due to the course set by the energy policy in our Group structure features five segments. We distinguish between five segments when domestic market, Germany. First and foremost, these consist of our German electricity reporting our business performance. The first four form our core business. Our segments generation from coal and nuclear fuel as well as our lignite production in the Rhenish are defined as follows: mining region to the west of Cologne. This is also where we report our investments in Dutch nuclear power plant operator EPZ (30 %) and Germany-based URANIT (50 %), • Offshore Wind: We present our business relating to offshore wind here. It is overseen by which holds a 33 % stake in uranium enrichment specialist Urenco. Most of the our Group company RWE Renewables. aforementioned activities and investments are overseen by RWE Power. RWE Generation is responsible for our German hard coal-fired power plants; we shut down the last two • Onshore Wind / Solar: This is the segment in which we pool our onshore wind and solar stations in mid-2021. business as well as parts of our battery storage activities. Here again, responsibility lies with RWE Renewables. Group companies with cross-segment tasks, such as the Group holding company RWE AG, are stated as part of the core business under the ‘other, consolidation’ line item. This also • Hydro / Biomass / Gas: Generation from our run-of-river, pumped storage, biomass applies to our stakes of 25.1 % in German transmission system operator Amprion and 15 % and gas power stations is pooled here. The segment also includes the Dutch Amer 9 in E.ON. However, the dividends we receive from E.ON are recognised in the financial result. and Eemshaven power plants, which run on biomass and hard coal, as well as individual Furthermore, ‘other, consolidation’ contains consolidation effects. battery storage systems. The project management and engineering consulting company RWE Technology International and our 37.9 % stake in Austrian energy utility KELAG are also allocated to this segment. The activities are overseen by RWE Generation. In addition, since 2021, this management company has been responsible for designing and implementing our hydrogen strategy. 46 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations Commentary on reporting 3 Responsibility statement 4 Consolidated financial statements 5 Further information Changed recognition of tax benefits for renewables in the USA. At the start of fiscal 2021, we changed the way in which we account for tax benefits received for US wind and solar projects. Renewable energy is subsidised largely via tax credits in the USA. Furthermore, plant operators can benefit from accelerated depreciation, referred to as tax benefits. Until 2020, they were recognised in taxes on income, whereas the benefits of tax credits were considered in other operating income. For the sake of consistency, we have also been recognising tax benefits since 2021. It has a positive impact on adjusted EBITDA. To ensure comparability, we restated the prior-year figures. More information can be found in the Notes on pages 108 et seq. Forward-looking statements. This report contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that we have made based on information available to us at the time this document was prepared. Despite this, actual developments can deviate from the prognoses, for instance if underlying assumptions do not materialise or unforeseen risks arise. Therefore, we cannot assume responsibility for the correctness of forward-looking statements. References. The contents of web pages and publications to which we refer in this chapter are not part of the Review of operations and merely provide additional information. 47 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.6 Business performance Fiscal 2021 was a very successful year for RWE, despite getting off to a lacklustre performance. Improved generation margins provided additional income. This enabled start. In February, extreme weather in Texas led to outages at wind farms and a us to increase the Group’s adjusted EBITDA by 11 % compared to the previous year. significant financial loss due to power purchases. However, we more than offset the We clearly exceeded the earnings forecast for 2021 which we published after the events earnings shortfalls as the year progressed, thanks to an exceptional energy trading in Texas. Business performance in 2021: What we forecast and what we accomplished € million 3,650 3,286 2,727 2,761 1,069 1,110 RWE Group Core business Offshore Wind 523 258 Onshore Wind / Solar Adjusted EBITDA  1 See pages 67 et seq. of the 2020 Annual Report. The hatched portion reflects the forecast range. Forecast overachieved Forecast met 2020 actual Forecast for 20211 2021 actual 2,185 1,823 1,569 1,257 621 731 769 539 889 559 Hydro / Biomass / Gas Supply & Trading Coal / Nuclear RWE Group RWE Group Adjusted EBIT Adjusted net income 48 RWE Annual Report 2021GWh Offshore Wind of which: Germany United Kingdom Netherlands Turkey Coal / Nuclear RWE Group 1 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Power generation1 Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total2 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Onshore Wind / Solar 16,709 16,762 Hydro / Biomass / Gas 7,899 5,832 7,564 7,009 – – 41 – – – – – – 80 52,257 46,894 – – – – – – – – – – – – – – – – – – 6,952 3,584 – – – – 6,952 3,584 – – – – – – – – – – – – – – – – 7,564 7,009 16,709 16,762 67,321 56,600 7,846 10,412 35,756 25,711 19,324 16,162 4,359 4,281 1,645 1,546 41 80 5,988 8,576 493 5733 5,725 3,679 – 18 – 19 – – – – – – – – 35,263 25,138 6,647 8,899 4,359 4,281 32,190 29,622 41 80 52,404 47,620 45,916 36,649 7,140 6,133 22,704 20,682 160,773 141,204 147 726 45,916 36,649 188 2,549 22,704 20,682 69,179 60,833 1 No longer considers power purchases from generation assets in which RWE does not own the majority, but which we have long-term usage rights to. Prior-year figures adjusted accordingly. 2 Including production volumes not attributable to any of the energy sources mentioned (e. g. electricity from waste-to-energy plants). 3 Adjusted figure. Electricity production 14 % up on prior year. In the fiscal year that just came to a close, the stations were also utilised more than in 2020, whereas generation from gas was down in RWE Group produced 160,773 GWh of electricity. Deviating from the former recognition Germany and the Netherlands. Our Dutch power plants Amer 9 and Eemshaven, which run method, this figure does not include power purchases from generation assets in which we on biomass and hard coal, stepped up production considerably. The rise at Eemshaven was do not own the majority, even if we have long-term usage rights to them. Prior-year figures due to the station’s return to nearly full availability after fire damage in the preceding year. including the purchases have been adjusted accordingly. Our electricity generation grew by Our German nuclear power stations also posted a substantial rise, because there were 14 % compared to 2020. The most significant increases were recorded by our German fewer maintenance outages. A counteracting effect was felt from the German coal lignite power stations, which benefited from favourable market conditions. Contributing phaseout. At the end of 2020, we ceased commercial operation of the Ibbenbüren B factors were the rise in electricity consumption compared to the previous year thanks to the (794 MW) and Westfalen E (764 MW) hard coal-fired power plants and shut down the economic recovery, as well as the weather-induced drop in wind energy fed into the system. Niederaussem D (297 MW) lignite unit. For these reasons and despite a significant hike in fuel costs, our UK gas-fired power 49 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Power generation from renewables1 Offshore Wind Onshore Wind Solar Hydro Biomass Total GWh Germany United Kingdom Netherlands Poland Spain Italy Sweden USA Australia Rest of the world RWE Group 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 1,811 2,082 939 1,168 5,557 4,690 1,719 2,134 – – – – – – – – 727 1,245 934 1,008 196 237 293 768 997 890 882 339 – – – – – – 8,961 9,059 – 41 – 30 7,564 7,009 15,867 16,267 3 – 17 1 96 – – 354 245 81 797 3 – 7 1 51 – – 271 65 34 1,645 1,483 – 4 4,398 4,740 189 2312 304 342 7,769 7,397 27 – 29 – – – – 14 – 29 – – – – 71 146 5,697 3,665 6,468 4,454 – – – – – – – – – – – – – – 1,246 1,059 1,008 489 998 970 882 576 9,315 9,330 245 193 65 210 432 1,961 1,903 6,001 4,011 32,190 29,622 1 No longer considers power purchases from generation assets in which RWE does not own the majority, but which we have long-term usage rights to. Prior-year figures adjusted accordingly. 2 Adjusted figure. Production from our wind farms was roughly on a par year on year. A positive effect was felt Lower generation capacity due to coal power plant closures. At the end of 2021, we had from the increase in our stake in the Rampion offshore wind farm (400 MW) in the UK as of an installed power production capacity of 36.1 GW. This figure does not include our three 1 April 2021 from 30.1 % to 50.1 % and the full consolidation of Rampion since then. German lignite units, which are in legally mandated security standby and will be shut down Furthermore, we commissioned the Scioto Ridge (250 MW) and Cassadaga (125 MW) wind for good in 2022 / 2023. Certain assets, where we are not the majority owner and which farms in the USA and started feeding electricity from the Triton Knoll offshore wind farm generate electricity that we can completely or partially use on the basis of long-term usage (857 MW) in the UK into the grid. Opposing effects were felt from lower wind speeds and the agreements, are also disregarded. In the past, we included the capacities of these stations sale of majority stakes in wind farms in Texas (see page 42). in the figures if we were entitled to the associated generation. Prior-year figures were In addition to our in-house generation, we procure electricity from suppliers outside of the Group. In the year being reviewed, these purchases totalled 48,131 GWh. In-house production and power purchases combined for 208,904 GWh (previous year: 200,715 GWh). adjusted. 50 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Our generation capacity declined by 1.6 GW compared to 2020. In line with the German In terms of generation capacity, gas is our main energy source, accounting for a share of coal phaseout, we decommissioned the Niederaussem C (295 MW), Neurath B (294 MW) 40 % at the close of 2021. Renewables take second place, with a share of 30 %. Our biggest and Weisweiler E (321 MW) lignite units as of 31 December 2021. The legal lifetime of the source of renewable energy is wind (8.9 GW), followed by biomass (0.8 GW), hydro (0.5 GW) Gundremmingen C (1,288 MW) nuclear power station ended on the same day. By contrast, and solar (0.5 GW). we increased production capacity from renewables by 0.6 GW in part as a result of our fully consolidating the Rampion offshore wind farm for the first time. Furthermore, we completed The geographic focus of our generation business is Germany, where 42 % of our installed the Limondale (249 MW) solar farm in Australia as well as the Scioto Ridge and Cassadaga capacity is located. The United Kingdom and the Netherlands follow, accounting for shares wind farms in the USA, whereas the sale of majority stakes in the Texan wind farms Stella of 27 % and 14 %, respectively. The USA comes in fourth: about half of our onshore wind (201 MW), Cranell (220 MW) and East Raymond (200 MW) had a counteracting effect. capacity is situated there, a large portion of which is in Texas. Installed capacity1 Renewables Pumped storage, batteries Gas Lignite Hard coal Nuclear Total2 As of 31 December, MW 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 Offshore Wind Onshore Wind / Solar 2,318 1,918 7,082 6,858 – 28 – 20 – – – – Hydro / Biomass / Gas 1,285 1,319 168 172 13,901 13,901 of which: Germany United Kingdom Netherlands  / Belgium Turkey Coal / Nuclear RWE Group3 393 139 753 – 12 389 137 748 – 7 168 172 3,807 3,807 – – – – – – – – 6,984 6,984 2,323 2,323 787 400 787 400 – – – – – – – – – – – – – – 7,638 8,548 – – – – 1,469 1,474 – – – – 1,469 1,474 – – – – – – – – – – – – – – – – – – 2020 1,918 6,877 2,318 7,110 17,115 17,158 4,407 7,376 4,545 787 4,407 7,374 4,545 787 1,482 2,770 9,559 11,752 10,697 10,102 199 194 14,301 14,301 7,638 8,548 1,469 1,474 1,482 2,770 36,104 37,708 1 No longer considers power plants taken offline as of 31 December. Assets scheduled for decommissioning are excluded from the capacity overview once they stop producing electricity. They include our lignite units in legally mandated security standby. No longer considers generation assets in which RWE does not own the majority, but which we have long-term usage rights to. Prior-year figures adjusted accordingly. Commercial rounding can result in inaccurate sum totals. 2 Including production volumes not attributable to any of the energy sources mentioned (e. g. electricity from waste-to-energy plants). 3 Including insignificant capacity at RWE Supply & Trading. 51 RWE Annual Report 2021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, MW 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Germany United Kingdom Netherlands Poland Spain Italy Sweden USA Australia Rest of the world RWE Group 598 598 1,672 1,272 – – – – – – – – 48 48 637 803 331 425 447 488 116 666 707 268 385 447 475 116 – – – – – – 3,313 3,543 – 36 – 10 2,318 1,918 6,596 6,616 3 – 17 1 45 – – 125 249 47 486 3 – – 1 45 – – 125 – 47 393 389 84 11 – 12 – – – – – 82 11 – 12 – – – – 61 556 – 55 – 55 1,630 1,655 2,615 2,117 742 737 1,100 1,016 – – – – – – – – – – – – – – 426 504 488 164 386 504 475 164 3,438 3,668 249 83 – 118 797 792 10,697 10,102 220 500 1 No longer considers power purchases from generation assets in which RWE does not own the majority, but which we have long-term usage rights to. Prior-year figures adjusted accordingly. Commercial rounding can result in inaccurate sum totals. CO2 emissions rise due to low wind speeds. Last year, our power stations emitted 80.9 million metric tons of carbon dioxide, 13.9 million metric tons more than in 2020. This CO2 emissions of our power stations1 Million metric tons represents the first increase after eight years of emissions reductions totalling 62 %, and Hydro / Biomass / Gas 2021 2020 25.0 20.3 despite the fact that we closed further coal power plants. In 2021, a series of factors drove up usage of our lignite-fired power stations: besides a recovery of demand for electricity, lower generation volumes from wind farms also played a part. In addition, gas-fired power plants were less competitive, due to soaring fuel costs. We expect to return back to our ambitious emission reduction path in 2022. Our specific emissions, i. e. the amount of carbon dioxide emitted per megawatt hour of electricity generated, amounted to 0.50 metric tons in the fiscal year that just came to a close. The previous year’s figure stood at 0.47 metric tons. of which: Germany United Kingdom Netherlands Turkey Coal / Nuclear RWE Group 2.6 12.8 8.0 1.6 55.9 80.9 3.5 9.1 6.1 1.6 46.7 67.0 + / – 4.7 – 0.9 3.7 1.9 – 9.2 13.9 1 No longer considers CO2 emissions from generation assets in which RWE does not own the majority, but which we have long-term usage rights to. Prior-year figures adjusted accordingly. 52 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information 62.6 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 62.6 million metric tons of lignite last year. This was 11.2 million metric tons more than in the preceding year, owing to the higher utilisation of our power plants. We used the lion’s share, or 53.2 million metric tons, of lignite to generate electricity. The remainder was used to manufacture refined products (e. g. lignite powder, hearth furnace coke and briquettes) and, to a limited extent, to generate process steam and district heat. Electricity and gas sales 4 % and 25 % higher year on year. Last year, we sold 203,101 GWh of electricity and 45,721 GWh of gas. These transactions were largely carried out by the Supply & Trading segment. We sold 4 % more of our main product, electricity. This growth can be traced back to the rise in generation from our power stations, which we usually sell externally via our Group company RWE Supply & Trading. Gas deliveries were up 25 %. One contributing factor was that RWE Supply & Trading won new key accounts, most notably municipal utilities. In addition, existing customers increased their gas purchases from us. External revenue 79 % up on 2020. Revenue from external customers (excluding natural gas tax and electricity tax) totalled €24,526 million in 2021. This represents a 79 % Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other Core business Coal / Nuclear RWE Group (excluding natural gas tax /  electricity tax) 2021 2020 + / – 688 2,324 1,315 19,296 4 332 1,855 1,056 9,597 9 356 469 259 9,699 – 5 23,627 12,849 10,778 899 839 60 24,526 13,688 10,838 Natural gas tax / electricity tax 235 208 27 RWE Group 24,761 13,896 10,865 External revenue by product € million Electricity revenue 2021 2020 + / – 20,476 11,701 8,775 increase over the previous year. Electricity revenue grew by 75 % to €20,476 million, of which: primarily due to the steep rise in the price of electricity last year. Price effects were also the main reason why our gas revenue quadrupled to €2,142 million. Additional information on the development of commodity quotations can be found on pages 38 et seq. One key performance indicator that is of particular interest to Sustainability investors is the portion of our revenue accounted for by coal-fired generation and other coal products. In the fiscal year that just ended, this share was 22 % (previous year: 23 %). Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Core business Coal / Nuclear Gas revenue of which: Supply & Trading Other revenue 688 2,107 877 16,540 20,212 264 2,142 2,142 1,908 332 1,676 684 8,775 11,468 233 534 529 1,453 356 431 193 7,765 8,744 31 1,608 1,613 455 RWE Group (excluding natural gas tax /  electricity tax) 24,526 13,688 10,838 53 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Adjusted EBITDA1 € million Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal / Nuclear RWE Group 2021 2020 + / – Our adjusted EBITDA was 11 % up on the prior year. In addition to the exceptional trading performance, improved margins of our lignite and nuclear power stations came to bear in 1,110 1,069 41 particular. This was contrasted by significant charges in our US wind energy business. As set 258 731 769 – 107 2,761 889 3,650 523 621 539 – 25 2,727 559 3,286 – 265 110 230 – 82 34 330 364 out on page 43, in early 2021, the worst cold snap in a century in Texas led to unscheduled plant outages, forcing us to fulfil existing electricity supply commitments with expensive power purchases on the market. The following developments were observed in the segments: • Offshore Wind: Adjusted EBITDA posted here amounted to €1,110 million. We had forecast a range of €1,050 million to €1,250 million. We recorded a gain of 4 % compared to 2020 (€1,069 million). One contributing factor was that we took a majority interest in the Rampion offshore wind farm in the UK as of 1 April 2021 and have fully consolidated this stake since then. Furthermore, we benefited from the partial commissioning of the Triton Knoll offshore wind farm. This was contrasted by earnings 1 Some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on page 47). Adjusted EBITDA of €3,650 million clearly exceeds expectations. Our adjusted earnings shortfalls caused by the reduced utilisation of our assets due to the weather. before interest, taxes, depreciation and amortisation (adjusted EBITDA) amounted to €3,650 million. This is far above our March 2021 forecast. The outlook we published on • Onshore Wind / Solar: In this segment, adjusted EBITDA totalled €258 million. We were pages 67 et seq. of the 2020 Annual Report envisaged a range of €2,650 million to therefore slightly above the targeted range of €50 million to €250 million. Improved €3,050 million. Adjusted EBITDA from our core business was also significantly better than margins resulting from the recent significant increase in wholesale electricity prices were originally expected, totalling €2,761 million. We had anticipated a figure between the main driver. Compared to the previous year (€523 million) however, adjusted EBITDA €1,800 million and €2,200 million. The fact that we easily exceeded our forecast was dropped considerably. This was primarily due to about €400 million in lost earnings predominantly thanks to an outstanding energy trading performance. We also closed the caused by the severe cold snap in Texas in February 2021. Besides this exceptional effect, fiscal year above the forecast ranges in the Onshore Wind / Solar and Hydro / Biomass / Gas lower wind speeds also came to bear. By contrast, we benefited from the commissioning segments. of new generation assets and capital gains on the sale of stakes in the US wind farms Stella, Cranell, East Raymond and West Raymond. 54 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Hydro / Biomass / Gas: Here, adjusted EBITDA came in at €731 million. This clearly exceeded the forecast range of €500 million to €600 million. Our outlook was based on Reconciliation to net income1 € million 2021 2020 + / – the assumption that income from the commercial optimisation of our power plant Adjusted EBITDA 3,650 3,286 364 2,185 – 650 – 13 1,522 – 690 832 – 832 1,823 – 104 – 454 1,265 – 376 889 221 1,110 – 2 362 – 546 441 257 – 314 – 57 – 221 – 278 dispatch would fall short of the high level achieved in 2020. In fact, however, it rose, especially in the fourth quarter. This is why we also exceeded adjusted EBITDA registered in the prior year (€621 million). The markedly improved availability of the Eemshaven power station also played a role. • Supply & Trading: Our performance in the trading business was exceptional. This led to €769 million in adjusted EBITDA, which clearly surpassed the envisaged range of Adjusted EBIT Non-operating result Financial result Income from continuing operations before taxes €150 million to €350 million. We also exceeded the previous year’s figure, which was very Taxes on income high (€539 million). In addition to the strong trading performance, improved earnings in Income from continuing operations Operating depreciation, amortisation and impairment losses – 1,465 – 1,463 the gas business also came to bear. • Coal / Nuclear: Adjusted EBITDA recorded in this segment amounted to €889 million, which was within the anticipated range of €800 million to €900 million. This represents strong growth compared to the preceding year (€559 million). The main reason for this was that we realised higher wholesale prices for electricity generated by our lignite-fired and nuclear power plants than in 2020. We had already sold forward nearly all of the production of these stations in earlier years. Income from the commercial optimisation of Income from discontinued operations Income of which: Non-controlling interests 111 59 52 Net income / income attributable to RWE AG shareholders 721 1,051 – 330 1 Some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewable energy power plant dispatch also rose. Furthermore, we benefited from the improved availability in the USA (see commentary on page 47). of our nuclear power stations. This was contrasted by earnings shortfalls caused by extensive maintenance at lignite-fired power plants. Further burdens stemmed from the Reconciliation to net income: Exceptional effects overshadow operating development. implementation of the German Coal Phaseout Act and the floods in the Rhenish lignite The reconciliation from adjusted EBITDA to net income was greatly affected by one-off mining region, on which we report on page 44. effects, which had a negative impact in net terms. The following is an overview of the changes to the items of the reconciliation statement. 55 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Adjusted EBIT1 € million Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal / Nuclear RWE Group 2021 2020 + / – Non-operating result1 € million 2021 2020 – 61 Disposal result – 283 Effects on income from the valuation of derivatives Other Non-operating result + / – 8 21 – 503 – 168 – 650 13 1,886 – 2,389 – 2,003 – 104 1,835 – 546 636 – 145 418 721 – 106 1,524 661 2,185 697 138 283 496 – 25 1,589 234 1,823 135 225 – 81 – 65 427 362 1 Some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on page 47). The non-operating result, in which we recognise certain items which are not related to operations or the period being reviewed, amounted to – €650 million as opposed to – €104 million in the preceding fiscal year. Its components developed as follows: • At €21 million, income from the disposal of investments and assets was essentially 1 Some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on page 47). The RWE Group’s adjusted EBIT rose by 20 % to €2,185 million, exceeding the range of immaterial, as in the previous year (€13 million). It largely resulted from the sale of small €1,150 million to €1,550 million forecast in March 2021. This growth was driven by the run-of-river power stations in France and Portugal (see page 43). same factors that bolstered adjusted EBITDA. The difference between these two key figures is that operating depreciation and amortisation, which at €1,465 million was basically on a • Effects from the valuation of derivatives reduced earnings by €503 million, after par with the previous year’s level (€1,463 million), is included in adjusted EBIT, but not in increasing them by €1,886 million in the preceding year. Such impacts are only temporary adjusted EBITDA. and are primarily due 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 a profit or loss when they are realised. • In the ‘other’ line item, we reported a loss of €168 million, which was much smaller than in the previous year (€2,003 million). Income in 2020 was curtailed by about €1.8 billion in impairments recognised for power plants and opencast lignite mines. Impairments relating to our lignite business were also recognised in the year being reviewed. They amounted to €780 million and are explained in more detail in the Notes on pages 112 et seq. Income benefited from the €880 million compensation for the nuclear phaseout in Germany we received from the government in November 2021. 56 RWE Annual Report 2021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 2021 2020 + / – Income from continuing operations before tax grew by €257 million to €1,522 million. 260 186 – 340 – 80 – 138 – 121 205 – 13 283 182 – 296 – 13 – 255 – 186 – 186 – 454 At 45 %, our effective tax rate was unusually high. One contributing factor was that we wrote – 23 off or did not recognise deferred tax assets in RWE AG’s tax group, because we are unlikely 4 – 44 – 67 117 65 391 441 to be able to use the deferred tax claims in the foreseeable future. Furthermore, an increase in the UK corporation tax rate effective as of 2023 drove up deferred tax liabilities. By contrast, the aforementioned tax refund for earlier years provided some relief. In the fiscal year being reviewed, there was no income from discontinued operations. In the preceding year, this figure amounted to €221 million. It stemmed from the stake in Slovak energy utility VSE, which we sold to E.ON in August 2020. Non-controlling interests in income rose by €52 million to €111 million. This is because we started fully consolidating Rampion in April 2021 and reduced our stake in the Humber Our financial result improved by €441 million to – €13 million. Its components changed as Gateway wind farm in the UK North Sea (219 MW) from 100 % to 51 % at the end of 2020. follows: Consequently, we now state non-controlling interests of the co-owners of these wind farms. A counteracting effect was felt from the sale of VSE: in 2020, a profit of €34 million had • Net interest dropped by €67 million to – €80 million, in part due to higher interest been assigned to the company’s co-shareholders. expenses in connection with currency hedges and higher costs incurred to pledge collateral in energy trading. Net interest includes the dividend on our 15 % stake in The RWE Group’s net income amounted to €721 million (previous year: €1,051 million). E.ON, which totalled €186 million (previous year: €182 million). This resulted in earnings per share of €1.07 (previous year: €1.65). The number of RWE shares outstanding used to calculate this indicator totalled 676.2 million compared to • The interest accretion to non-current provisions reduced income by €138 million. In the 637.3 million in the previous year. These figures are annual averages. In August 2020, previous year, the decline was more substantial (€255 million) because we had lowered we issued 61.5 million new RWE shares via a capital increase. the discount rate applied when calculating our mining provisions and the resulting increase in the present value of the obligations had in part been recognised as an expense in the interest accretion. • The other financial result rose by €391 million to €205 million. The main reason for the increase was a one-off effect of interest claims in relation to a tax refund for earlier assessment periods. Furthermore, a charge incurred in the prior year did not recur: in March 2020, we suffered substantial losses on security holdings owing to the turmoil on financial markets caused by the COVID-19 pandemic. 57 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Reconciliation to adjusted net income 2021 € million Adjusted EBIT Non-operating result Financial result Taxes on income Income of which: Non-controlling interests Net income / income attributable to RWE AG shareholders Original figures 2,185 – 650 – 13 – 690 832 111 721 Adjustment Adjusted figures – 2,185 Capital expenditure on property, plant and equipment and on intangible assets1 € million 650 – 196 394 848 – – 209 – 296 1,680 – 111 Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal / Nuclear 848 1,569 RWE Group 2021 2020 + / – 1,683 1,404 294 47 2 3,430 259 3,689 756 1,154 153 43 – 2,106 183 927 250 141 4 2 1,324 76 2,2852 1,404 1 Table only shows cash investments. 2 Including a – €4 million consolidation effect between the core business and the Coal / Nuclear segment. Adjusted net income higher than expected. Adjusted net income amounted to €1,569 million. Due to the unexpectedly positive development of operating earnings, it was well above the guided range of €750 million to €1,100 million. The prior-year figure of €1,257 million was also clearly exceeded. To calculate adjusted net income, we corrected Capital expenditure on financial assets1 € million net income according to IFRS by deducting the non-operating result and major special Offshore Wind items in the financial result from it. Instead of the actual tax rate, we applied a rate of 15 %, which reflects the tax level net of one-off effects that can theoretically be expected. Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other, consolidation Core business Coal / Nuclear RWE Group 1 Table only shows cash investments. 58 2021 2020 + / – 27 27 6 20 – 80 – 80 520 408 115 18 11 1,072 1 1,073 – 493 – 381 – 109 2 – 11 – 992 – 1 – 993 RWE Annual Report 20211 To our investors 2 Combined review of  operations Business performance 3 Responsibility statement 4 Consolidated financial statements 5 Further information Marked increase in capital expenditure on renewable energy. In the past fiscal year, our Workforce 1 31 Dec 2021 31 Dec 2020 capital spending totalled €3,769 million, 12 % more than in 2020 (€3,358 million). The lion’s share of the funds was dedicated to the Offshore Wind (45 %) and Onshore Wind / Solar (38 %) segments. Our capital expenditure on property, plant and equipment and intangible assets amounted to €3,689 million (previous year: €2,285 million). The Triton Knoll wind farm in the UK North Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Other2 Sea received the biggest share of investments. Significant sums were also spent to build the Core business Sofia wind farm off the eastern coast of England (1,400 MW), the Kaskasi wind farm near Heligoland (342 MW), the Blackjack Creek (240 MW) and El Algodon Alto (200 MW) onshore wind farms in Texas, and the Hickory Park solar farm in the US state of Georgia (196 MW plus battery storage). In addition, we made advance payments for the rights we secured in an auction in February 2021 to develop new offshore wind areas in the UK North Sea (see page 40). Coal / Nuclear RWE Group 1 Converted to full-time positions. 2 This item exclusively comprises employees of the holding company RWE AG. 1,277 2,146 2,606 1,804 467 8,300 9,946 18,246 1,119 2,402 2,667 1,790 425 8,403 11,095 19,498 + / – 158 – 256 – 61 14 42 – 103 – 1,149 – 1,252 At €80 million, capital expenditure on financial assets was much lower than the high figure had 18,246 people on its payroll, of which 13,585 were employed in Germany and registered in the prior year (€1,073 million), which included our acquisitions of the 20 % 4,661 worked abroad. Part-time positions were considered in these numbers on a pro-rata stake in the Rampion offshore wind farm and Nordex’s European development business basis. Personnel figures were down markedly compared to the end of 2020 (– 1,252). We Headcount significantly down year on year. As of 31 December 2021, the RWE Group (see page 43 of the 2020 Annual Report). recorded a significant decline (– 1,149) in the Coal / Nuclear segment where many employees accepted early retirement offers as part of the German coal phaseout. Although we created a large number of jobs by expanding renewable energy, headcount in our core business declined somewhat. The main reason for this was that we sold large parts of the Belectric Group. Staff figures do not include apprentices or trainees. At the end of 2021, 785 young adults were learning a profession at RWE, compared to 750 in the previous year. 59 RWE Annual Report 20211 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.7 Financial position and net worth Our financial position and net worth continued to improve in 2021. Even though we • For short-term refinancing, we have a Commercial Paper Programme, which was updated invested billions in the expansion of renewables, our net debt fell to less than zero. As of in 2021. It allows us to raise funds equivalent to up to €5 billion on the money market. the balance-sheet date, the RWE Group posted net assets of €360 million. This pleasing During the past fiscal year, we accessed a large portion of this funding volume: at times, development was particularly thanks to our strong cash flow from operating activities. a total of up to €3 billion in commercial paper was outstanding. Our robust credit ratings also underline how strong our financial position is. The agencies Moody’s and Fitch raised RWE’s credit rating by one notch last year. Our • To secure our liquidity, we also have access to a €5 billion syndicated credit line extended current long-term ratings are investment grade, at Baa2 and BBB+ respectively. by a consortium of 27 international banks. It consists of two tranches: one of €2 billion, RWE AG bears responsibility for procuring funds. Responsibility for Group financing is centralised at RWE AG. As the parent company, RWE AG is responsible for acquiring funds from banks or the financial markets. Subsidiaries only raise debt capital directly in specific which expires in April 2022, and one of €3 billion, which is available through to April 2026. At our initiative, sustainability criteria were added to the conditions of the second tranche last year. Among other things, the conditions now depend on the development of the following three indicators: the share of renewables in RWE’s generation portfolio, the CO2 intensity of our plants and the percentage of our capex that is classified as sustainable in cases, for example if it is advantageous economically to make use of local credit and capital accordance with the EU taxonomy regulation. We have set goals for all three of these markets. RWE AG also acts as a co-ordinator when subsidiaries assume contingent criteria. If we do not achieve the targets, we will have to pay higher interest and liabilities. This allows us to manage and monitor financial risks centrally. Moreover, it commitment fees. Half of the additional expenses would be directed to non-profit strengthens our position when negotiating with banks, business partners, suppliers and organisations. This new structure for the credit line underlines our commitment to our customers. emissions reduction strategy. Tools for raising debt capital. We cover most of our financing needs with earnings from Green bonds worth €1,850 million issued. For the first time ever, RWE AG issued green our operating activities. In addition, we have a wide range of tools to procure debt capital: bonds in 2021. In June, we placed a 10-year bond with a nominal volume of €500 million and an annual coupon of 0.625 %, followed by two issues in November: a 7-year bond of • Our Debt Issuance Programme (DIP) gives us latitude in raising debt capital for the long €750 million and a 12-year bond of €600 million, with annual coupons of 0.5 % and 1.0 %, term. Our current DIP allows us to issue bonds with a total face value of up to €10 billion. respectively. Additional information on these three debt securities can be found on page 21. By issuing three green bonds, we exercised this financing option in 2021 for the first time The proceeds of green bonds are tied to specific purposes. We will use these funds in six years. exclusively for wind and solar projects. 60 RWE Annual Report 20211 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information Bond volume rises to €2.4 billion. RWE bonds with a total face value equivalent to €2.4 billion were outstanding at the end of 2021, versus €0.6 billion in the previous year. Cash flow statement1 € million The significant increase was due to the aforementioned issues. Along with the three green Funds from operations bonds, RWE still has two outstanding hybrid bonds: one of €282 million with a 3.5 % coupon Change in working capital 2021 2020 + / – 7,103 4,108 2,995 171 17 154 and one of US$317 million with a 6.625 % coupon. Due to early buybacks in October 2017, the outstanding amounts are below the issuance volumes of €550 million and US$500 million. The earliest redemption dates for the two hybrid bonds are in April 2025 and March 2026, respectively. Cash flows from operating activities of continuing operations 7,274 4,125 3,149 Cash flows from investing activities of continuing operations – 7,738 – 4,278 – 3,460 Cash flows from financing activities of continuing operations 1,457 1,769 – 312 Effects of changes in foreign exchange rates and other changes in value on cash and cash equivalents 58 – 34 92 Credit rating of RWE AG Moody’s Fitch Total net changes in cash and cash equivalents 1,051 1,582 – 531 As of March 2022 Long-term debt Senior debt Subordinated debt (hybrid bonds) Short-term debt Outlook Current Previous Current Previous Baa2 Baa3 Ba1 P-2 Ba2 P-3 BBB+ BBB- F1 BBB BB+ F2 Cash flows from operating activities of continuing operations 7,274 4,125 3,149 Minus capital expenditure – 3,769 – 3,358 – 411 Plus proceeds from divestitures / asset disposals 1,057 365 692 Free cash flow 4,562 1,132 3,430 Stable Positive Stable Stable 1 All items solely relate to continuing operations; some prior-year figures restated due to a change in the recognition of tax benefits to subsidise renewables in the USA (see commentary on page 47). Solid investment grade rating. The conditions at which we can raise debt largely depend Robust improvement in operating cash flow. Our cash flows from operating activities of on rating agencies’ assessment of our creditworthiness. Moody’s and Fitch make such continuing operations amounted to €7,274 million, clearly exceeding the prior-year figure evaluations on request from us. In the past year, both agencies raised their credit rating for (€4,125 million). The good earnings situation and the compensation paid to us in November RWE by one notch. RWE’s long-term creditworthiness is now rated Baa2 (Moody’s) and BBB+ 2021 by the German Federal government for the phaseout of nuclear energy had positive (Fitch), both with a stable outlook. These are investment grade ratings. The ratings for our hybrid bonds and current financial liabilities are now also one level higher (see table above). Moody’s and Fitch cited RWE’s transformation into a leading renewables company as the effects. The main reason for the increase, however, were high margin payments for forward contracts for electricity, fuel and CO2 certificates. RWE concludes contracts of this kind to reduce earnings risk exposure. For exchange-traded derivatives, we first have to provide reason for the rating improvement. This business is characterised by attractive and an initial margin. Additionally, over the term of the contract, we receive or pay variation relatively stable earnings. margins, depending on how the market value of the derivative changes. So-called collateral has to be provided for over-the-counter derivative transactions. 61 RWE Annual Report 20211 To our investors 2 Combined review of  operations Financial position and net worth 3 Responsibility statement 4 Consolidated financial statements 5 Further information During the year under review, we received a high amount of variation margins, which are included in cash flow from our operating activities. This was contrasted against significant Net assets / net debt1 € million outflows of funds for initial margins and collaterals, which we reported in cash flows from Cash and cash equivalents financing activities. Investing activities of continuing operations led to a cash outflow of €7,738 million (previous year: €4,278 million). €3,769 million of this sum stemmed from our capital expenditure on property, plant and equipment and financial assets. Moreover, we made significant investments in securities and an extraordinary increase of the assets used to meet pension obligations in the amount of €1,092 million. This was contrasted by revenues from the sale Marketable securities Other financial assets Financial assets 31 Dec 2021 31 Dec 2020 + / – 5,825 8,347 12,403 26,575 4,774 4,517 2,507 1,051 3,830 9,896 11,798 14,777 Bonds, other notes payable, bank debt, commercial paper – 10,704 – 2,160 – 8,544 Hedging of bond currency risk – 9 – 31 22 of business activities and shareholdings of €1,057 million. The most important transactions Other financial liabilities were the sale of our stakes in the US wind farms Stella, Cranell, East Raymond and West Financial liabilities – 7,090 – 3,038 – 4,052 – 17,803 – 5,229 – 12,574 Raymond as well as the disposal of the grid connection for the Rampion offshore wind farm Plus 50 % of the hybrid capital stated as debt 290 278 12 in the UK (see page 41). Financing activities of continuing operations produced cash inflows of €1,457 million (previous year: €1,769 million). In 2021, we recorded high income from bank loans taken out, the issuance of commercial paper and the three green bonds we issued, which are discussed on page 60. However, we also had to make substantial payments for initial Net financial assets (including correction of hybrid capital) 9,062 6,847 Provisions for pensions and similar obligations – 1,934 – 3,864 Surplus of plan assets over benefit obligations Provisions for nuclear waste management 459 – 6,029 – 1,198 360 172 – 6,451 – 1,136 – 4,432 2,215 1,930 287 422 – 62 4,792 margins and collaterals. Outflows of funds were also registered due to dividend payments Provisions for dismantling wind farms to RWE shareholders and minority shareholders. Net assets (+) / net debt (–) On balance, the aforementioned cash flows from operating, investing and financing activities increased our cash and cash equivalents by €1,051 million. 1 Mining provisions are not included in net debt. The same holds true for the assets which we attribute to them. At present, this includes our 15 % stake in E.ON and our claim for state compensation for the German lignite phaseout in the amount of €2.6 billion. Cash flows from operating activities, less capital expenditures, plus proceeds from divestments and asset disposals, results in free cash flow. This amounted to €4,562 million, up substantially on the prior-year figure (€1,132 million). 62 RWE Annual Report 2021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 assets of €360 million. Our net debt declined by €4,792 million versus the previous Moderate decline in off-balance-sheet fuel purchase obligations. Net debt does not year (€4,432 million). As a result of this, we posted a net asset position of €360 million as of include our off-balance-sheet obligations, which largely stem from long-term purchase 31 December 2021. The main reason for this was the excellent free cash flow. The market- agreements for fuel and electricity. As of the balance-sheet date, our payment obligations driven increase in the discount rates we use to calculate the present value of pension from material fuel procurement contracts amounted to €22.3 billion (previous year: obligations also played a role, as it resulted in a decline in provisions for pensions. A similar €23.6 billion). In relation to electricity procurement, they amounted to €7.1 billion and were effect was exerted by the income generated from managing the plan assets for our pension thus as high as in 2020. The figures are based on assumptions regarding the prospective obligations. While the aforementioned extraordinary funding of these assets in the amount development of commodity prices. Our purchase commitments rose from €2.1 billion to of €1,092 million caused provisions to decline, it was coupled with a corresponding outflow €5.6 billion over the course of the year. Further off-balance-sheet obligations result, inter of funds and thus did not result in a reduction of debt. Dividend payments lowered our net alia, from liabilities for pension commitments that employees of our former subsidiary financial position by €730 million. innogy had earned at RWE up to its IPO in 2016. Leverage factor below zero. One of our key management parameters is the ratio of net Sharp increase in balance-sheet total due to temporary effects from commodity debt to the adjusted EBITDA of the core business, also referred to as the leverage factor. derivatives. At 31 December 2021, the Group balance sheet was strongly influenced by This figure is more indicative than total liabilities, as it also reflects earning power and changes in commodity derivatives. They rose by €56.4 billion on the assets side and therefore our ability to meet our debt obligations. We set the upper limit for the leverage €68.2 billion on the liabilities side. This was driven by the extreme increase in prices of factor at 3.0 in order to secure our financial flexibility. As the RWE Group did not have any electricity and natural gas. The increase in these derivatives was the main reason that the net debt as of the balance-sheet date and posted a net asset position, this indicator was balance-sheet total of €142.3 billion was more than twice as high as in 2020 (€61.6 billion). below zero. However, the leverage factor should increase in the medium term, above all due Another reason for this development was that we raised a large amount of debt capital. to growth investments in our green core business, which we will also finance using debt Among other things, the funds were used to collateralise derivative transactions, which capital. resulted in a corresponding build-up of receivables. At €17.0 billion, our equity was slightly below last year’s level. The equity ratio amounted to 11.9 %. Due to the increase in the balance-sheet total, this figure was significantly lower compared to 2020 (28.7 %). 63 RWE Annual Report 2021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 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 € million % € million % € million % € million % Assets Non-current assets of which: Intangible assets Property, plant and equipment Current assets of which: 38,863 27.3 34,418 55.8 Non-current liabilities Equity and liabilities Equity 5,884 19,984 103,446 4.1 14.0 72.7 4,899 17,902 27,224 7.9 29.0 44.2 of which: Provisions Financial liabilities Current liabilities of which: Trade accounts receivable 6,470 4.5 3,007 4.9 Provisions Receivables and other assets Marketable securities Assets held for sale 79,626 56.0 12,531 20.3 Trade accounts payable 8,040 657 5.6 0.5 4,219 1,061 6.8 1.7 Other liabilities Liabilities held for sale Financial liabilities 16,996 28,306 16,943 6,798 97,007 4,268 10,996 4,428 77,315 – 11.9 19.9 11.9 4.8 68.2 3.0 7.7 3.1 54.4 – 17,706 27,435 19,470 3,951 16,501 3,004 1,247 2,387 9,282 581 28.7 44.5 31.6 6.4 26.8 4.9 2.0 3.9 15.1 0.9 Total 142,309 100.0 61,642 100.0 Total 142,309 100.0 61,642 100.0 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewables in the USA (see page 47) and retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see page 95). 64 RWE Annual Report 2021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 2.8 Notes to the financial statements of RWE AG (holding company) The financial statements of RWE AG are significantly influenced by the business performance of its subsidiaries. In sum, the profit transfers of these companies recorded an increase in 2021. This was contrasted by an impairment recognised for a subsidiary. We posted positive developments in other income and expenses as well as in net interest. Overall, RWE AG’s earnings position has therefore improved: at €1,108 million, RWE AG’s net profit was substantially higher than in 2020. We intend to raise the dividend and will therefore propose a payment of €0.90 per share to the Annual General Meeting taking place in April 2022. This constitutes an increase of €0.05 Net profit Income statement of RWE AG (abridged) € million 2021 2020 + / – Income from financial assets Net interest Other income and expenses Taxes on income Transfer to other retained earnings Distributable profit 378 318 132 280 1,108 – 499 609 1,114 – 72 – 712 250 580 – 5 575 – 736 390 844 30 528 – 494 34 versus last year. Balance sheet of RWE AG (abridged) € million Assets Financial assets Accounts receivable from affiliated companies Other accounts receivable and other assets Marketable securities and cash and cash equivalents Total assets Equity and liabilities Equity Provisions Other liabilities Total equity and liabilities Accounts payable to affiliated companies 18,743 18,905 31 Dec 2021 31 Dec 2020 + / – 17,866 20,524 – 2,658 Code and the German Stock Corporation Act. The financial statements are submitted Financial statements in accordance with German commercial law. RWE AG prepares its financial statements in compliance with the rules set out in the German Commercial 7,922 616 11,709 38,113 2,094 519 6,664 29,801 8,359 2,245 7,826 1,996 8,766 1,074 5,828 97 5,045 8,312 533 249 – 162 7,692 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/financial-reports. Assets. RWE AG had €38.1 billion in total assets as of 31 December 2021 (previous year: €29.8 billion). Accounts receivable from affiliated companies registered a significant rise. This was mainly because we made cash and cash equivalents available to our subsidiary RWE Supply & Trading as collateral for commodity forward transactions. We also posted significant increases in ‘marketable securities and cash and cash equivalents’ and ‘other liabilities’. In the year under review, we increased our liabilities significantly by way of bank loans, commercial paper and green bonds. These funds were, inter alia, used to secure liquidity, with a portion thereof, e. g. the proceeds generated by bonds issued, earmarked for growth investments. RWE AG’s equity rose by €533 million to €8,359 million. However, the 38,113 29,801 8,312 equity ratio decreased from 26.3 % to 21.9 %, due to the increase in the balance sheet total. 65 RWE Annual Report 2021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 Financial position. RWE AG is set up solidly in economic terms with high levels of cash and • In 2021, we recorded tax income of €280 million (previous year: €250 million). This is cash equivalents and a number of financing tools at its disposal that it can use flexibly. largely due to the aforementioned tax refunds for earlier assessment periods. Accordingly, rating agencies Moody’s and Fitch classify our creditworthiness as ‘investment grade’. Last year, they both raised our respective credit rating by one level to Baa2 (Moody’s) • Versus 2020 (€580 million), the presented earnings figures led to a considerably higher and BBB+ (Fitch). You can find detailed information on RWE’s financial situation and on our net profit of €1,108 million. financing activities in the year under review on pages 60 et seqq. • The distributable profit of €609 million corresponds to the planned payment of a dividend Earnings position. RWE AG’s earnings position improved compared to 2020. The main of €0.90 per share to our shareholders. items on the income statement developed as follows: • Income from financial assets dropped by €736 million to €378 million. One reason for performance of its subsidiaries. Our current assessment makes us confident that we will this was an impairment loss recognised in relation to our stake in RWE Power. However, achieve a net profit in 2022 that offers the necessary margins for the intended dividend of this company’s profit transfer was higher than in 2020, which was attributable to €0.90. However, it is unlikely to match the level achieved in 2021. Outlook for 2022. RWE AG’s earnings prospects will largely depend on the business improved generation margins and lower charges resulting from impairments, depreciation and amortisation. RWE Nuclear also gained considerable ground. This was Corporate governance declaration in accordance with Sections 289f and 315d of the due to the compensation we received from the German government for the nuclear German Commercial Code. On 15 February 2022, the Executive Board and the Supervisory phaseout (see page 36). By contrast, income from our stake in RWE Supply & Trading Board of RWE AG issued its Corporate Governance Declaration in accordance with Sections decreased. 289f and 315d of the German Commercial Code. The declaration contains the Corporate Governance Report and has been published at www.rwe.com/corporate-governance- • Net interest increased by €390 million to €318 million. This was in part due to a rise in declaration. capital gains from the management of plan assets used to cover our pension obligations and was further boosted by interest claims relating to tax refunds for earlier assessment periods. • The ‘other income and expenses’ line item improved by €844 million to €132 million. In the year under review, we recognised write-backs for financial accounts receivable from a Dutch subsidiary. This reversed impairments in previous years to some extent. 66 RWE Annual Report 20211 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.9 Outlook We are confident of being able to pick up where we left off last year in terms of our Our power production for 2022 has already largely been sold forward. Wholesale earnings position. As things stand, we anticipate adjusted EBITDA of €3.6 billion to electricity prices rose considerably last year, surging again in early 2022 due to the Ukraine €4.0 billion. Our core business is expected to close fiscal 2022 up on last year’s conflict. Their development during the current year is impossible to predict, but market earnings, which had been heavily impacted by the extreme weather conditions in Texas. fluctuations would only have a moderate impact on this year’s generation margins as we The commissioning of new generation capacities is set to have a positive effect. We also expect to see improved electricity margins and better wind conditions. After last year’s extraordinarily successful energy trading performance, we anticipate income to have already largely sold forward our electricity production for 2022 and hedged the prices of the required fuel and CO2 emission allowances. These transactions have been concluded up to three years ahead, and already reflect the rise in electricity prices in 2021 to a limited normalise. Not yet included in our forecast is the fallout of the Ukraine conflict, which is extent. A large portion of electricity generated by RWE wind farms, where revenue is market- difficult to assess. How events unfold and how sanctions against Russia affect dependant, has also already been sold forward. European energy supply may have a significant impact on our business. Ukraine crisis puts economic growth at risk. Forecasts concerning the economic Forecast € million development in our core markets are linked to considerable uncertainties related to the Adjusted EBITDA Ukraine conflict. Estimates available when the combined review of operations was written had been compiled before the war broke out. Based on these figures, world economic output could increase by about 4 % in 2022. Growth rates forecast for the Eurozone, Germany and the USA are of a similar order, while those for the United Kingdom and the Netherlands are expected to reach 3 %. Should energy prices remain extremely high due to the Ukraine conflict, then the economy may well prove to be less dynamic. Rise in electricity consumption anticipated. Higher economic output is generally associated with additional demand for electricity. However, this is contrasted by continued energy savings which will probably have a slightly dampening effect. Provided the aforementioned economic prognoses prove to be accurate, demand for electricity in our key markets Germany, the Netherlands, the UK and the USA should be between 1 % and 3 % higher than in 2021. of which: Core business of which: Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading Coal / Nuclear Adjusted EBIT Adjusted net income 67 2021 actual Outlook for 2022 3,650 3,600 – 4,000 2,761 2,900 – 3,300 1,110 1,350 – 1,600 258 731 769 889 650 – 800 700 – 900 150 – 350 650 – 750 2,185 1,569 2,000 – 2,400 1,300 – 1,700 RWE Annual Report 20211 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2022 adjusted EBITDA of €3.6 billion to €4.0 billion expected. Subject to the risks • Onshore Wind / Solar: Our prognosis for this segment is adjusted EBITDA of €650 million associated with the Ukraine conflict, which are difficult to gauge, we expect this year’s to €800 million, clearly surpassing last year’s level (€258 million). The main contributing business performance to pick up where we left off in terms of our good operating result in factor will be the non-recurrence of the one-off burden due to the cold snap in Texas 2021. We forecast adjusted EBITDA for the Group of €3,600 million to €4,000 million in 2021. In addition, we anticipate higher generation volumes due to the commissioning (previous year: €3,650 million) for 2022 and envisage a range of €2,900 million to of new generation capacity and more favourable wind conditions. Higher generation €3,300 million in the core business, thus exceeding last year’s figure (€2,761 million) which margins will also help earnings to rise. This will be contrasted by an increase in expenditure had been heavily burdened by an extreme cold snap in Texas in February 2021. We assume on the development of growth projects. Furthermore, last year’s result included capital the commissioning of new wind and solar farms and higher electricity margins to have gains on the sale of majority stakes in Texan wind farms, which will not recur. a positive effect on earnings. Moreover, we expect to see average wind speeds, which would improve the utilisation of our wind farms compared to 2021, which was a low-wind year. • Hydro / Biomass / Gas: Here, we forecast adjusted EBITDA of €700 million to By contrast, we may well fall short of the very good result achieved in the energy trading €900 million. Therefore, the segment stands a good chance of closing 2022 up on last business last year. We anticipate a decline in EBITDA outside of the core business, i. e. in the year’s figure (€731 million). Higher margins on electricity forward sales will play a Coal / Nuclear segment, due to decommissioning of generation capacities, in particular the significant role. Moreover, we expect capital gains from the sale of a former power plant closure of the Gundremmingen C nuclear power station as of 31 December 2021. site in the United Kingdom. Conversely, income from the commercial optimisation of Based on anticipated operating depreciation and amortisation of approximately from the British capacity market will also decline. An unscheduled outage at the Dutch €1,600 million, adjusted EBIT should range between €2,000 million and €2,400 million Claus C gas-fired power station is also expected to have a negative effect. power plant dispatch may well fall short of the high level achieved in 2021. Payments (last year: €2,185 million). Net income, which excludes major exceptional effects, is expected to total between €1,300 million and €1,700 million (last year: €1,569 million). • Supply & Trading: Earnings in this segment are difficult to predict due to the high volatility We explain how this key figure is calculated on page 58. of the trading business. Assuming that business develops normally, adjusted EBITDA Our outlook broken down by segment is as follows: should range between €150 million and €350 million. In this case, it would be substantially below the unusually high level recorded last year (€769 million). • Offshore Wind: Adjusted EBITDA in this business is forecast to total between €1,350 million • Coal / Nuclear: Here, we anticipate a decrease in adjusted EBITDA to between and €1,600 million (last year: €1,110 million). We expect the full commissioning of the €650 million and €750 million (last year: €889 million). The main reason for this is the Triton Knoll wind farm to play an important part. In addition, the first full consolidation of closure of the Gundremmingen C nuclear power station and five lignite units in 2021. the Rampion wind farm for the year as a whole is also likely to have a positive effect. This will be contrasted by positive effects stemming from cost savings. Furthermore, we anticipate higher margins than last year and expect utilisation of our assets to improve due to the weather. 68 RWE Annual Report 20211 To our investors 2 Combined review of  operations Outlook 3 Responsibility statement 4 Consolidated financial statements 5 Further information Capital expenditure on property, plant and equipment markedly up on last year. In comparison to 2021 (€3,689 million), we plan on substantially increasing our property, plant and equipment and intangible asset investments. Considerable funds will be allocated to building the Kaskasi and Sofia offshore wind farms near Heligoland and in the UK North Sea, respectively. Further investments will be made in wind, solar and battery projects in the USA and Europe as well as the construction of a gas-fired power station at Biblis, which is needed to stabilise the electricity grid. Outside of the core business, in the Coal / Nuclear segment, we plan to spend about €200 million on property, plant and equipment, mainly to maintain our power stations and opencast mines. Leverage factor to stay below upper limit of 3.0. One of our key management parameters is the ratio of net debt to adjusted EBITDA of the core business, also referred to as the leverage factor. As explained on page 63, the leverage factor fell below zero in 2021. However, it will probably rise again in the long run. This is largely on account of our planned growth investments, a portion of which we will finance by raising debt capital. It is virtually impossible to make leverage factor forecasts for individual years primarily due to the significant liquidity fluctuations that can result from the collateralisation of commodity forward transactions. Nevertheless in 2022, we anticipate this key performance indicator to be clearly below 3.0, i. e. the cap we have set for it. Dividend for fiscal 2022. The Executive Board of RWE AG aims to pay a dividend of €0.90 per share for the 2022 financial year. This corresponds to the dividend that we intend to propose to the Annual General Meeting on 28 April 2022 for fiscal 2021. 69 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information 2.10 Development of risks and opportunities RWE’s transformation into a growth company in the green economy has improved our A number of additional organisational units and committees have been entrusted with risk risk-opportunity profile. Thanks to the predominantly high, stable revenues that can be management tasks: generated with renewables, not only are we more profitable, we are also more resilient. However, Russia’s invasion of Ukraine has given rise to new uncertainties. What this • Financial risks and credit risks are managed by the Finance & Credit Risk Department of conflict will mean for the energy industry and the development of RWE’s business is RWE AG. impossible to predict. The German government’s plans to accelerate the phaseout of coal-based power generation also pose a risk and could be associated with significant • The Accounting Department ensures that financial reporting is free of material financial burdens for RWE. However, if framework conditions prove favourable, they misstatements. It has an accounting-related internal control system for this purpose. also offer us the chance to proceed more quickly towards climate neutrality. 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 can be found on page 79. Distribution of risk management tasks at RWE. Responsibility for Group risk management lies with the parent company RWE AG. Its Executive Board monitors and manages the • Risks from changes in commodity prices are monitored by RWE Supply & Trading in so Group’s overall risk. In addition, it determines the general risk appetite of RWE and far as they relate to the conventional electricity generation, energy trading and gas defines upper limits for single risk positions. At the level below the Executive Board, the businesses. Where these risks relate to the renewable energy business, they are managed Controlling & Risk Management Department has the task of applying and constantly refining by RWE Renewables. the risk management system. It derives detailed limits for the individual business fields and operating units from the risk caps set by the Executive Board. Its tasks also include checking • Strategies to limit market risks in conventional electricity generation must be approved the identified risks for completeness and plausibility and aggregating them. In so doing, it by the Commodity Management Committee. This expert panel consists of the CFO of receives support from the Risk Management Committee, which is composed of the heads RWE AG, members of the Board of Directors of RWE Supply & Trading and a representative of the following five RWE AG departments: (1) Controlling & Risk Management (Chair), of the Controlling & Risk Management Department. (2) Finance & Credit Risk, (3) Accounting, (4) Legal, Compliance & Insurance, and (5) Strategy & Sustainability. The Controlling & Risk Management Department provides the • We also have a committee tasked with mitigating market risks associated with the Executive Board and the Supervisory Board of RWE AG with regular reports on the renewable energy business. The Renewables Commodity Management Committee company’s risk exposure. consists of the CFO of RWE AG, members of the management of RWE Renewables and a representative of the Controlling & Risk Management Department. 70 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information Under the expert management of the aforementioned organisational units, RWE AG and its subsidiaries are responsible for identifying risks early, assessing them correctly and managing them in compliance with corporate standards. Internal Audit regularly verifies the quality and functionality of our risk management system. The Executive Board formally establishes the Group’s risk bearing capacity. This took place by way of a resolution dated 23 November 2021. Risk identification and assessment. Risks and opportunities are defined as negative or positive deviations from expected figures. Their management is an integral and continuous part of operating processes. We assess risks every six months, using a bottom-up analysis. We also monitor risk exposure between the regular survey dates. The Executive Board of Potential damage1 Category V Category IV Category III RWE AG is immediately notified of any material changes. Our executive and supervisory Category II bodies are updated on the Group’s risks once a quarter. Category I Our risk analysis normally covers the three-year horizon of our medium-term plan, but can extend beyond that in individual cases. We measure the potential damage based on the possible effects on net income, liquidity, net debt and/or equity. In doing so, we take hedges into account. We define the potential damage as the deviation from the budgeted figure in question, aggregated over the planning horizon. We display the material risks using a matrix (see chart on the right) in which they are categorised by potential damage and probability of occurrence. Risks that share the same Potential damage1 cause are aggregated to a single risk, if possible. To clearly assign them to the matrix fields, we have established damage potential thresholds, which are oriented towards the RWE Group’s ability to bear risks. They are presented in the table below the matrix. € million RWE AG risk matrix 1 % ≤ P ≤ 10 % 10 % < P ≤ 20 % 20 % < P ≤ 50 % 50 % < P Probability of occurrence (P) Low risk Medium risk High risk Earnings risks Potential impact on net income (X) Indebtedness / equity risks Potential impact on liquidity, net debt and / or equity (Y) Category V 8,000 ≤ X 8,000 ≤ Y Depending on their position in the matrix, we distinguish between low, medium and high risks. Category IV 1,500 ≤ X < 8,000 4,000 ≤ Y < 8,000 Based on this systematic risk identification, we determine whether there is a need for action Category III 600 ≤ X < 1,500 and initiate measures to mitigate the risks if necessary. Category II Category I 300 ≤ X < 600 X < 300 1 Aggregated over the planning horizon. 71 2,000 ≤ Y < 4,000 1,000 ≤ Y < 2,000 Y < 1,000 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information Risk classes Market risks Regulatory and political risks Legal risks Operational risks Financial risks Creditworthiness of business partners Other risks Classification of the highest single risk As set out earlier, the focus of the risk analysis described in this chapter lies on the three- 31 Dec 2021 31 Dec 2020 year horizon of our medium-term plan. In 2017, the Task Force on Climate-related Financial Medium High Low Medium Medium Medium Low Medium Medium Low Medium Medium Medium Medium Disclosures (TCFD), a panel of experts, recommended that companies consider time horizons that go far above and beyond this when identifying and assessing climate-related risks. RWE implements the TCFD proposals. We explain how we do this in our 2021 Sustainability Report, which will be published in April 2022 and will then be available at www.rwe.com/sustainability-report. In this section, we provide commentary on the main risks and opportunities we have identified for this and the next two years and explain what measures have been taken to counter the threat of negative developments. Main risks for the RWE Group. Depending on their causes, our risks can be divided into • Market risks. In most of the countries in which we are active, the energy sector is seven classes, which are shown in the table. The highest individual risk determines the characterised by the free formation of prices. This presents both opportunities and risks. classification of the risk of the entire risk class. Our classification of risks reflects the Over the course of the past year, prices quoted in our key European electricity forward situation in early March 2022. It was not possible to predict the impact of the Ukraine markets hit an all-time high. As a result, the earnings prospects of our generation assets conflict at this time. The following changes have been made versus last year’s risk became considerably more favourable. If limits are placed on Russian natural gas imports classification: in the long term due to the Ukraine conflict, then energy prices should remain at a high level. However, there is a possibility that the economy will fall into a recession and that • We adjusted the classification of our regulatory and political risks upwards from ‘medium’ electricity prices will drop again. to ‘high’. One reason for this is the plan of the new government coalition, made up of the Social Democrats, the Green Party and the Free Democrats, to accelerate the German With regard to power and gas purchase agreements, if the conditions are not coupled to coal phaseout without granting the affected companies compensation. Far-reaching EU the development of wholesale prices, there is a risk of having to pay more for the product sanctions against Russia could also have a significant impact on our business. 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 • We reclassified our ‘other risks’ from ‘medium’ to ‘low’ because the economic impact of the electricity from the Datteln 4 hard coal-fired power plant in 2005 and 2006. The station coronavirus pandemic has become more manageable. Previously, we believed our single- was commissioned by energy group Uniper in mid-2020, ten years later than planned. We largest other risk was that a reduction in demand for energy caused by the pandemic were unsuccessful in taking legal recourse against the continuation of the agreements. would cause electricity prices to drop over the long term and we would thus have to A further legal dispute regarding certain contractual provisions with Uniper is still pending. recognise impairments for generation assets. Now we feel that this is unlikely. 72 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE has a long-term gas purchase agreement with Russian energy group Gazprom. Our risk management system for energy trading is firmly aligned with best practice as What the Ukraine crisis will mean for this contract remains to be seen. We have the option applied to the trading businesses of banks. As part of this, transactions with third parties to negotiate contractual changes depending on market conditions during price reviews, are concluded only if the associated risks are within approved limits. There are guidelines should it remain effective. In the past, this has enabled us to mitigate our earnings risk governing the treatment of commodity price risks and associated credit risks. Our exposure from the contract. subsidiaries constantly monitor their commodity positions. Risks associated with trades conducted by RWE Supply & Trading for its own account are monitored daily. We assess the price risks to which we are exposed on the procurement and supply markets taking account of current forward prices and expected volatility. For our power The Value at Risk (VaR) is of central importance for risk measurement in trading. It plants and parts of our renewable energy portfolio, we limit the earnings risks by selling a large portion of the electricity forward. Whenever we need fuel and CO2 emission allowances to produce power, we secure the respective prices when we sell the electricity. specifies the maximum loss from a risk position not exceeded with a predetermined probability over a predefined period of time. The RWE Group’s VaR figures are generally based on a confidence interval of 95 % and a holding period of one day. This means that, This makes it easier for us to plan generation margins in coming years. However, if we sell with a probability of 95 %, the daily loss will not exceed the VaR. too much electricity forward, we run the risk of having to make expensive purchases on the market to fulfil supply commitments in the event of production outages. An example The VaR for the price risks of commodity positions in the trading business should not of such a situation was the extreme cold snap in Texas in February 2021, on which we exceed a certain daily cap. In the past, this upper limit was initially set at €40 million, but report on page 43. The consequences of this weather event prompted us to review and was increased by €10 million at the beginning of 2021 and again in early 2022. In the optimise our hedging strategy. period under review, the actual amounts averaged €32 million. The daily maximum was €50 million. In addition, limits derived from the respective VaR thresholds have been set We also use financial instruments to hedge our commodity positions. In the consolidated for every trading desk. Furthermore, we develop extreme scenarios and factor them into financial statements, these instruments are inter alia presented through the statement of stress tests, determine their impact on earnings, and take countermeasures if we deem on-balance-sheet hedges. The same applies to financial instruments serving the purpose the risks to be too high. of limiting interest rate and currency risks. More detailed information on this can be found on pages 105 and 158 et seqq. in the Notes. The management of our gas portfolio and the liquefied natural gas (LNG) business is pooled in a dedicated organisational unit at RWE Supply & Trading. During the past year, RWE Supply & Trading plays a central role when it comes to managing commodity price the daily VaR cap for these activities was raised from €14 million to €25 million. We used risks. It functions as the Group’s interface to the global wholesale markets for electricity a maximum of €22 million of this headroom. The average VaR for the year was €8 million. and energy commodities. On behalf of our power plant companies, RWE Supply & Trading markets large portions of our electricity output and purchases the necessary fuel and CO2 certificates. Since RWE Supply & Trading acts as the internal transaction partner it is easier The massive price spikes recently observed in energy trading could continue due to the Ukraine conflict. Nevertheless, our market risks remain unchanged in the ‘medium’ for us to limit the risks associated with price volatility on energy markets. However, the category. trading transactions are not exclusively intended to reduce risks. In compliance with risk thresholds, the company also takes commodity positions to achieve a profit. 73 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Regulatory and political risks. Most countries in which we are active have set their sights We are also exposed to risks associated with the coal phaseout in the Netherlands, on ambitious climate protection goals. A number of them, including Germany, have where a law was passed in 2019 that prevents us from using hard coal in Amer 9 and recently introduced more stringent objectives. To meet these targets, they will need to Eemshaven as of 2025 and 2030, respectively. There are no plans to offer compensation. continue to improve the framework for renewable energy and green hydrogen. For We accept the coal phaseout, but do not believe it is just that the law does not provide for companies such as RWE, which have designed their business model around the energy any remuneration for this intervention in companies’ property rights. Given the lack of transition, this is associated with opportunities for growth. At the same time, our concessions by Dutch policymakers, we have submitted an application for arbitration ambitious carbon-reduction strategy has meant that regulatory interventions to improve proceedings in accordance with the Energy Charter Treaty with the International Centre climate protection are no longer associated with such high risks. for Settlement of Investment Disputes in Washington. We hope this will give us the Nevertheless, changes to political and regulatory frameworks can severely impact us. The Netherlands introduced a cap on coal firing in power plants, which will apply from 2022 to Ukraine crisis, in particular, is currently associated with risks. For example, there is the 2024. We are likely to be awarded compensation in relation to this measure, however it is possibility that Russian commodities suppliers are no longer able to meet their obligations not yet clear how much it will be. Furthermore, the EU Commission will still need to opportunity to receive financial compensation. In addition to the coal phaseout, the due to the sanctions against Russia, forcing us to procure these commodities on the approve it under state aid law. market at high prices. It cannot be ruled out that contractual partners become insolvent because of the sanctions. Moreover, in core markets such as Germany, politicians could Although the renewable energy business is characterised by fairly stable framework intervene with regulatory measures to secure energy supply and stabilise consumer conditions and wide public acceptance, political uncertainties exist in this area as well. prices. It is not yet possible to foresee what effects this could have on RWE. Adjustments to state subsidy schemes may result in reductions in payments and new A core component of Germany’s climate protection strategy is reducing coal-fired It is also conceivable that firmly pledged state payments may be cut retrospectively. In electricity generation to zero by 2038. In exchange for closing our lignite assets early, we the dialogue we maintain with policymakers, we point out that companies which invest in are due €2.6 billion in compensation, which is still pending approval under EU state aid building sustainable, climate- friendly energy infrastructure need reliable framework projects losing their appeal. This can lead to investment undertakings being broken off. law. There is now talk of the exit roadmap being expedited. Germany’s new government conditions. has announced that it ideally wants electricity generation from coal to end as early as 2030 and that it does not intend to grant affected companies any additional Even in the present regulatory environment, we are exposed to risks associated with, for compensation. This would impose considerable financial burdens on RWE. However, the instance, approvals for constructing and operating production facilities. This particularly accelerated coal phaseout also presents us with opportunities as it presupposes more affects our opencast mines, power stations and wind farms. The danger here is that favourable framework conditions for the construction of environmentally friendly approvals are granted late or not at all and that granted approvals are withdrawn replacement plants, while the expansion of renewables would also have to be ramped up. temporarily or for good. Furthermore, it cannot be ruled out that the courts will This would benefit the implementation of our growth strategy. Moreover, the government legislatively prohibit the transfer of land that has been assigned to us in the vicinity of our might pay us compensation after all. opencast mines. 74 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information Producers in Germany benefit from lower tax rates on in-house electricity, gas and oil These hedging instruments are standard practice in sales of companies and equity consumption. RWE also utilises this financial mechanism. The Federal government, holdings. however, intends to reform the legal basis for these benefits in accordance with the EU’s guidelines on climate and environmental protection and state aid for energy. There is a We currently have low exposure to legal risks. This assessment did not change compared risk that the new rules will be more restrictive and that we will possibly either receive lower to the previous year. discounts from 2023, or none at all. Certain statutory regulations to which we must adhere can be interpreted in various ways assets. Damage and outages can weigh heavily on earnings, as seen in 2021 during the and are therefore in need of legal clarification. One example is the regulation which severe cold snap in the US state of Texas (see page 43). The recent sharp rise in electricity exempts us from paying an apportionment under the Renewable Energy Act (EEG) for prices is associated with a higher risk of earnings losses but also presents opportunities electricity that we consume ourselves in our German power stations and opencast mines. should the utilisation of our assets be higher than anticipated. To mitigate these risks, we However, the legal situation surrounding the regulation is vague, for example with regard ensure that our supply commitments are not too high, as we may be forced to buy to the EEG exemption of leased assets. There is a danger that using this exemption may electricity at a high cost to meet these obligations in case of production outages, for be limited by Germany’s highest court and that back payments may even have to be example. Furthermore, we also regularly maintain our facilities and take out insurance made for previous years. policies if economically viable. • Operational risks. RWE operates technologically complex, interconnected generation As set out earlier, we have adjusted the assessment of our regulatory and political risks When production facilities are built and modernised, delays and cost increases can occur, from ‘medium’ to ‘high’, which is due to the uncertainties associated with the Ukraine for example due to logistical bottlenecks or inadequate services provided by suppliers. conflict and Germany’s coal exit. The coronavirus pandemic and international trade conflicts have recently proven to be risk factors. Project delays can cause costs to rise and earnings to be delayed. • Legal risks. Individual RWE Group companies are involved in litigation and arbitration Furthermore, delays of renewable energy projects can be disadvantageous to the level of proceedings due to their operations or M & A transactions. Out-of-court claims have been subsidies they receive. We counter these risks through circumspect planning and diligent filed against some of them. Furthermore, Group companies are directly involved in various project management. 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 The COVID-19 pandemic, which has persisted for two years now, continues to expose us proceedings before ordinary courts and arbitration courts. to risks, albeit to a manageable extent. As before, deliveries can be delayed. Theoretically, it is also conceivable that the reliable operation of our plants may be jeopardised if a large Risks may also result from exemptions and warranties that we granted in connection with number of employees goes on sick leave. Thanks to comprehensive preventive measures the sale of assets. Exemptions ensure that the seller covers the risks that are identified and forward-looking emergency plans, so far we have been able to keep all major within the scope of due diligence, the probability of occurrence of which is, however, operational processes up and running, and we are confident that we can continue doing so. uncertain. In contrast, warranties cover risks that are unknown at the time of sale. 75 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information RWE has ambitious growth targets and has increased its investment budgets significantly. Rises in market interest rates can lead to reductions in the prices of the securities we hold We take care to ensure that our new-build projects and acquisitions satisfy our return and vice versa. This primarily relates to fixed-interest bonds. In 2021, we started requirements. If positive market developments occur after an investment decision has measuring the price risk using a sensitivity analysis. As of the balance-sheet date, an been made, electricity revenue and thus also returns can exceed expectations. However, increase in market interest rates of 100 basis points would have lowered the value of the it is also possible that income achieved through our projects falls short of forecasts and bonds on our books by €28 million. that prices paid for acquisitions prove to be too high retrospectively. We prepare our investment decisions by conducting extensive analyses to try and map the financial and Moreover, interest rates also determine our financing costs. We measure the possible strategic effects as realistically as possible before taking investment decisions. Moreover, impact using the Cash Flow at Risk (CFaR), applying a confidence level of 95 % and a RWE has specific accountability provisions and approval processes in place to prepare holding period of one year. The average CFaR at RWE AG in 2021 was €8 million. and implement the decisions. Our business processes are supported by secure data processing systems. Nevertheless, inflation can force us to increase the value of our future obligations and raise provisions. it is not possible to rule out a lack of availability of IT infrastructure or a breach in data Price increases are particularly detrimental when they are above average in sectors from security. There is also a risk of cyber attacks. The Ukraine crisis may trigger a rise in these which we procure products and services for nuclear waste disposal and recultivating sorts of attacks. We limit our IT risks with high security standards, and groupwide cyber opencast mine areas. Changes to the general price level can also give rise to risks and opportunities. Rising security training programmes are designed to mitigate them. In addition, we regularly invest in hardware and software upgrades. With our focus on the global expansion of renewables, changes in exchange rates may increasingly impact our earnings. Companies which are overseen by RWE AG have their As in the previous year, we classify our operational risks as ‘medium’. currency risks managed by the parent company. These risks are aggregated to a net financial position for each currency and hedged using currency derivatives if necessary. • Financial risks. Interest rates, foreign exchange rates, securities prices and rates of Our foreign currency risks are measured using sensitivity analyses. In the course of such, inflation are subject to fluctuations, which can be difficult to predict and can have a major we calculate how a 10 % change in the exchange rate would affect the value of the impact on our net worth and earnings. respective foreign currency position. As of the balance-sheet date, the sum total of the Changes in interest rates give rise to risks and opportunities in several respects. Market interest rates, for example, can impact our provisions, as they are the point of reference Security price fluctuations can have a considerable impact on RWE’s financial assets and for the discount rates used for determining the net present values of obligations. This pension funds. In case of a stock market crisis, for example due to the conflict in Ukraine, means that, all other things being equal, provisions decrease when market interest rates we would possibly need to significantly increase our pension provisions in order to rise and increase when market interest rates fall. On pages 144 et seq. of the Notes, we compensate our fund assets potentially losing value. We are also exposed to share price present the effects of changes in interest rates on the net present values of our pension risks in relation to our 15 % stake in E.ON, which had a fair value of €4.8 billion at the end obligations and on the nuclear and mining provisions. of 2021. sensitivities amounted to €0.3 million. 76 RWE Annual Report 2021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 opportunities from changes in the price of securities are controlled by a Despite this, net debt could temporarily be above budget, for instance if we have to pay professional fund management system. Range of action, responsibilities and controls are high variation margins. Nevertheless, we are confident that we can keep our indebtedness set out in internal guidelines which the Group companies are obliged to adhere to when below the cap. concluding financial transactions. All financial transactions are recorded using special software and are monitored by RWE AG. Despite the significant increase in volatility on commodity markets, we continue to classify our financial risks as ‘medium’. Collateral pledged for forward transactions also harbours a risk. The amount of the payments – variation margins in the case of exchange transactions – depends on the • Creditworthiness of business partners. Our business relations with key accounts, extent to which the contractually agreed prices deviate from market quotations as of the suppliers, trading partners and financial institutions expose us to credit risks. Therefore, respective cut-off date. If differences are substantial, then they may weigh heavily on our liquidity. As set out on page 38 et seq., wholesale prices of electricity, natural gas and CO2 emission allowances spiked substantially in 2021. This forced us to pay unusually high 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 variation margins for electricity forward sales. Thanks to our robust financial position and limits, which we determine before the transaction is concluded and adjust if necessary, for use of financing instruments at our disposal, we were always able to provide the required instance in the event of a change in the business partner’s creditworthiness. At times, we funds. Another positive factor was that we received significant margin payments in relation to forward sales of commodities, in particular of CO2 emission allowances. request cash collateral or bank guarantees. In the trading and financing business, credit risks and the utilisation of the limits are measured daily. We agree on collateral when concluding over-the-counter trading transactions. Furthermore, we enter into framework The conditions at which we finance our debt capital are in part dependent on the credit agreements, e. g. those of the European Federation of Energy Traders. For financial ratings we receive from independent rating agencies. As set out on page 61, Moody’s derivatives, we make use of the German master agreement for forward financial and Fitch place our creditworthiness in the investment grade category. If our rating transactions or the master agreement of the International Swaps and Derivatives deteriorates, we may incur additional costs if we have to raise debt capital. This would Association. probably also increase the liquidity requirement when pledging collateral for forward transactions. However, we believe that such a scenario is unlikely. Just last year, Moody’s The significant price spikes on commodity markets have increased the danger of and Fitch raised our credit score by one notch to Baa2 and BBB+, respectively, both with transaction partners being unable to meet their obligations. The Ukraine crisis has further a stable outlook. In doing so, they rewarded us for our transformation into a leading exacerbated this risk, in particular in relation to trading with Russian commodities renewable energy company through which we have become more financially robust. producers. This exposes us to substantial financial losses especially with regard to contracts that are particularly valuable to us. We are monitoring the default risks closely The assessment of our creditworthiness by rating agencies, banks and capital investors and are assessing counterbalancing measures. depends in part on the level of our net debt. Our goal is to ensure that, in the medium term, it does not exceed three times the adjusted EBITDA of our core business. Although our risks stemming from the creditworthiness of our business partners have increased overall, they still do not exceed the ‘medium’ category. 77 RWE Annual Report 20211 To our investors 2 Combined review of  operations Development of risks and opportunities 3 Responsibility statement 4 Consolidated financial statements 5 Further information • Other risks. This is the class in which we record the potential effects of damage to our be associated with improved framework conditions for the expansion of renewables and for reputation, compliance infringements and criminal acts. The risk of a COVID-19-driven the creation of environmentally friendly backup assets. The additional investments and the decrease in electricity prices which may force us to recognise impairments for generation steeper climb towards reducing emissions should again increase our acceptance among assets has also been recorded in this category. However, we now believe it is very unlikely capital lenders and customers. It is also possible that the government may offer fair that this will come to pass. Therefore, we have lowered the category of other risks from compensation regulations, contrary to early statements. ‘medium’ to ‘low’. RWE’s risks and opportunities: General assessment by management. Shifting our prices remain high, renewable energy assets that do not receive fixed payments will achieve generation portfolio from fossil fuels to renewables has improved RWE’s opportunity-risk profile. By 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 additional revenue. This also holds true for our conventional power stations as long as additional earnings are not offset by higher costs of fuel and CO2 allowances. However, high electricity prices also increase the potential for greater earnings shortfalls in the event of among politicians, capital lenders, customers and other stakeholder groups. At the same unscheduled plant outages. Price hikes on the energy markets could also see the funds time, our solid financial management ensures that our company remains on a safe course. needed to collateralise forward contracts rise at short notice. The same applies to income By analysing the effects of risks on our liquidity and pursuing a conservative financing generated by these contracts. As a result, standards on our liquidity management would strategy, we ensure that we can meet our payment obligations punctually. We have become stricter and the risk of our contracting parties being unable to make payments The booming commodity markets presents us with opportunities. If wholesale electricity considerable liquid funds and great leeway in terms of debt financing, thanks to the Debt would rise. Issuance Programme, the Commercial Paper Programme and the syndicated credit line (see page 60). We budget our liquidity with foresight, based on the short, medium and RWE has been affected by COVID-19 to a limited extent so far, and we are confident that long-term financing needs of our Group companies, and always hold a significant amount this will not change. Projects may still be delayed owing to the pandemic. However, the risk of minimum liquidity. of a sustained COVID-19-induced economic crisis resulting in a reduction in electricity prices and impairments to power stations has not materialised. In view of the latest As shown by the commentary in this chapter, we consider unfavourable changes to the economic recovery and the record energy prices, we now find that such a scenario is political and regulatory framework to be our biggest risk. Due to the war in Ukraine, unlikely. developments are conceivable that could have a considerable negative impact on us. We are monitoring events closely as they unfold and are trying to limit these risks as much as Thanks to the measures for safeguarding our financial and earning power over the long possible. We could also become exposed to significant financial burdens due to the term and our comprehensive risk management system, we are confident that we can accelerated coal phaseout. We therefore class the political and regulatory risks as ‘high’. manage our current risks. At the same time, we are establishing the prerequisites for In the previous year, we had classed them as ‘medium’. That being said, we also see ensuring that this remains the case in the future. Overall, we do not currently foresee any opportunities here. For example, we are confident that an earlier German coal exit would risks that would undermine the viability of RWE AG or the RWE Group. 78 RWE Annual Report 2021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. First, we examine whether the Para. 4, and Sec. 315, Para. 4 of the German Commercial Code. Our financial reporting is risk situation is presented appropriately and whether suitable controls are in place for the exposed to the risk of misrepresentations that could have a significant influence on the identified risks. Then, we test the effectiveness of the controls. If the ICS reviews pertain to decisions made by their addressees. For example, stated earnings that are too high can accounting-related processes, e. g., to the preparation of financial statements or to cause capital investors to invest in a company. Capital market law regulations and RWE’s consolidation, they are conducted by employees from the Accounting Department. When Code of Conduct require that we inform the public of our business performance and it comes to processes handled by service centres on our behalf, for example invoice important company specific events completely, objectively, accurately, clearly and in a processing, an auditor certifies the appropriateness and effectiveness of the controls. timely manner. We use a series of tools to meet this ambition. Examples of this are our IFRS The representatives of the finance, human resources, procurement, trading, and IT accounting regulation and the high minimum standards to which we subject the IT systems functions document whether the agreed ICS quality standards are adhered to by their used to record and process accounting-related data. Furthermore, we use an accounting- respective areas. Our Internal Audit & Compliance Department also oversees the ICS related Internal Control System (ICS) for quality assurance purposes. The ICS aims to detect reviews. The results of the reviews are documented in a report to the Executive Board of potential errors and misrepresentations that result from non-compliance with accounting RWE AG. The review conducted in 2021 once again demonstrated that the ICS is effective. standards. The Accounting Department of RWE AG is responsible for designing the ICS and reviewing its effectiveness. In doing so, it applies groupwide rules. In addition, it receives Within the scope of external reporting, the members of the Executive Board of RWE AG take assistance from the ICS Committee, the objective of which is to ensure that the ICS is an initial half-year and a full-year balance-sheet oath, confirming that the prescribed applied throughout the Group following uniform principles and meeting high ambitions in accounting standards have been adhered to and that the financial statements give a true terms of correctness and transparency. The Committee consists of representatives from the and fair view of the net worth, financial position and earnings. When in session, the Accounting, Controlling & Risk Management and Internal Audit & Security Departments, Supervisory Board‘s Audit Committee regularly concerns itself with the effectiveness of the along with officers from the human resources, procurement, trading, finance, taxes and IT ICS. Once a year, the Executive Board of RWE AG submits a report on this to the Committee. functions, which are highly relevant to accounting. 79 RWE Annual Report 2021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 2.11 Disclosure relating to German takeover law The following disclosure is in accordance with Sections 315a and 289a of the German Employees can exercise the control rights conferred on them from the employee shares in Commercial Code as well as with Section 176, Paragraph 1, Sentence 1 of the German the same manner as other shareholders can whilst in compliance with statutory regulations Stock Corporation Act. The information relates to company-specific regulations, for and the provisions of the Articles of Incorporation. example relating to adjustments to the capital structure by the Executive Board or a change of control of the company. At RWE, these provisions are in line with the Shares in capital accounting for more than 10 % of voting rights and special rights with standards of German listed companies. control powers. As of 31 December 2021, no holding in RWE AG exceeded 10 % of the voting rights. There are no RWE shares with special rights that confer control powers. Composition of subscribed capital. RWE AG’s capital stock amounts to Appointment and dismissal of Executive Board members / amendments to the Articles €1,731,123,322.88. It is divided among 676,220,048 no-par-value bearer shares. of Incorporation. Executive Board members are appointed and dismissed in accordance with Sections 84 et seq. of the German Stock Corporation Act in conjunction with Section Limitation of voting rights or share transfers and employee share schemes. One share 31 of the German Co-Determination Act. Amendments to the Articles of Incorporation are grants one vote at the Annual General Meeting and determines the proportion of the made pursuant to Sections 179 et seqq. of the German Stock Corporation Act in company’s profit to which the shareholder is entitled. This does not apply to RWE AG’s conjunction with Article 16, Paragraph 5 of the Articles of Incorporation of RWE AG. treasury stock, which does not confer any rights to the company. Voting rights are excluded According to the aforementioned provision in the Articles of Incorporation, unless otherwise by law in cases where Section 136 of the German Stock Corporation Act applies. required by law or the Articles of Incorporation, the Annual General Meeting shall adopt all Within the scope of an employee share plan, we issued 288,624 RWE shares to our simple majority of the capital stock represented when the resolution is passed. Pursuant to employees in Germany in the financial year that just ended. The beneficiaries may only Article 10, Paragraph 9 of the Articles of Incorporation, the Supervisory Board is authorised freely dispose of the shares after 31 December 2022. to pass resolutions in favour of amendments to the Articles of Incorporation that only resolutions by a simple majority of the votes cast or – if a capital majority is required – by the RWE also has employee share schemes in the United Kingdom. Participating companies are RWE Generation UK plc, RWE Supply & Trading GmbH UK Branch and RWE Technology UK Executive Board authorisation to implement issuances and buybacks of RWE shares. Limited. In 2021, employees purchased a total of 23,181 RWE shares under the UK On 28 April 2021, the Annual General Meeting authorised the Executive Board to increase schemes. These shares are also subject to a restriction on disposal, which lasts five years the company’s capital stock subject to the approval of the Supervisory Board by up to concern formal matters, without having a material impact on the content. from the grant date. €346,224,663.04 through the issuance of up to 135,244,009 bearer shares (authorised capital). The authorisation is limited to five years and expires on 27 April 2026. 80 RWE Annual Report 2021 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 On 28 April 2021, the Annual General Meeting further authorised the Executive Board until In sum, shares issued from authorised capital with a waiver of subscription rights and in 27 April 2026, subject to Supervisory Board approval, to issue bearer convertible and / or connection with convertible or option bonds may not exceed 10 % of the capital stock. option bonds with a total face value of up to €5,000,000,000 with or without a limited The aforementioned upper limit is defined by the amount of capital stock at the time the maturity and to grant the bondholders convertible or option rights to bearer shares in the resolution providing the authorisation is adopted or when the authorisation is exercised, if company. To enable the issuance of shares to holders of convertible and / or option bonds, the capital stock is lower. Other measures taken waiving subscription rights count towards the Annual General Meeting of 28 April 2021 conditionally increased the company’s capital the upper limit. stock by up to €173,112,330.24, divided into up to 67,622,004 registered or bearer shares (conditional capital). The Annual General Meeting of 26 April 2018 authorised the Executive Board of RWE AG, subject to Supervisory Board approval, to purchase shares in the company accounting for New shares from authorised capital and the aforementioned bonds may be issued in up to 10 % of the capital stock when the resolution is passed or when the authorisation is exchange for contributions in cash or in kind. These shares must generally be tendered exercised, if the latter is lower at that time. At the Executive Board’s discretion, the purchase to the shareholders for subscription. However, the Executive Board is authorised, subject can be made on the stock exchange or via a public offer. to Supervisory Board approval, to waive subscription rights in the following cases: • to avoid fractions of shares resulting from the subscription rate; Shareholder subscription rights may be waived depending on the purpose for which the Shares acquired in this manner may be used for all purposes described in the authorisation. • if the issuance is conducted in exchange for contributions in kind; shares are used. • to provide protection from dilution in connection with convertible and / or option bonds contain clauses that take effect in the event of a change of control. Such a provision is in Effects of a change of control on debt financing. Our debt financing instruments often that have already been issued; and place e. g. in respect of our €5 billion syndicated credit line, and essentially means that in the event of a change of control or majority at RWE AG, drawings are suspended until further • if the issue price of the new shares or bonds is not significantly below their quotation or notice. The lenders shall enter into negotiations with us on a continuation of the credit line. their theoretical fair value calculated by generally accepted methods of quantitative finance The time limit for doing this is 30 days from the notification of the change of control. On and if waived subscription rights are limited to no more than 10 % of the capital stock. expiry of the time limit, lenders who are not satisfied with the outcome of the negotiations may revoke their loan commitment or cancel the loan if it has already been paid out, requesting immediate repayment. 81 RWE Annual Report 2021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 The green bonds issued in 2021 (see page 60) are also subject to change-of-control Compensation agreement with the Executive Board and employees in the event of a clauses. In the event that a change of control is announced or implemented, investors may takeover offer. The current version of the German Corporate Governance Code dated request that their bonds be redeemed by a certain deadline, if RWE’s long-term credit rating 16 December 2019 recommends that no commitments to additional benefits be made in falls below investment grade due to the change of control or the rating agencies stop the event that Executive Board members terminate their employment contract early due to issuing us a credit rating. A similar rule applies to the senior bond that matures in 2037, a change of control. We fully adhere to this principle, meaning that we have not included a small portion of which remained on our books as it could not be fully transferred to innogy clauses envisaging a special right of termination or rights to severance subject to a change in 2016. of control in any of the current employment contracts of the members of the Executive In the event of a change of control, we can redeem our two subordinated hybrid bonds with Board of RWE AG. volumes of €282 million and US$317 million within the determined change-of-control Share-based payments made to the Executive Board members and executives are subject period. If they are not redeemed and our long-term credit rating also falls below investment to the following provisions: in the event of a change of control, RWE will pay out all the grade or credit ratings are no longer issued, their annual yield rises by 500 basis points. performance shares that have been finally granted, but have not been paid out yet on expiry of the holding period. Performance shares granted on a preliminary basis on the date of a change of control are valued based on the degree to which the targets have been achieved up to that point in time. Performance shares granted on a preliminary basis in the year of the change of control lapse. They are replaced by a new plan of equal value for the Executive Board members and executives for the fiscal year in which the change of control occurs and the following years. 82 RWE Annual Report 2021“Wind energy has a bright future. Being part of the energy transition is really exciting and opens up so many doors.” Zefiro Drieghe, Wind Farm Supervisor, RWE Renewables 3 Responsibility Statement 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, 3 March 2022 The Executive Board Krebber Müller Seeger 84 RWE Annual Report 2021 “For us, safety comes first. Both on site and when it comes to supplying our customers with energy.” Ute Brimberg, Cluster Manager of the Emsland gas-fired power station, RWE Generation 4 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 86 87 88 90 92 93 184 220 228 236 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: 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 € Note (1) (1) (1) (2) (3) (4) (5), (10) (6) (7), (12) (7) (8) (8) (9) (26) 2021 24,761 235 24,526 2,257 17,713 2,502 2,373 3,081 291 130 1,810 1,823 1,522 – 690 832 832 111 721 1.07 1.07 20201 13,896 208 13,688 4,977 9,814 2,365 3,136 1,950 381 – 62 1,933 2,387 1,265 – 376 889 221 1,110 59 1,051 1.65 1.36 0.29 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 86 RWE Annual Report 2021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 non-controlling interests 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 2021 832 1,150 10 1,117 2,277 126 – 29 – 3,474 17 – 3,360 – 1,083 – 251 – 462 211 20201 1,110 – 493 – 46 – 143 – 682 – 391 19 – 233 – 6 – 611 – 1,293 – 183 – 200 17 87 RWE Annual Report 2021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 Note 31 Dec 2021 31 Dec 20201 1 Jan 20202 (10) (11) (12) (13) (14) (15) (16) (17) (14) (15) (18) (19) 5,884 19,984 3,021 5,477 111 3,490 233 663 4,899 17,902 3,276 4,237 131 3,434 142 397 4,777 19,016 3,252 4,337 128 3,276 264 680 38,863 34,418 35,730 2,828 12,394 6,470 66,805 427 8,040 5,825 657 103,446 142,309 1,632 2,482 3,007 9,821 228 4,219 4,774 1,061 27,224 61,642 1,585 2,359 3,621 12,755 196 3,258 3,192 1,274 28,240 63,970 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) and retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 2 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 88 RWE Annual Report 2021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 Note 31 Dec 2021 31 Dec 20201 1 Jan 20202 (20) (22) (23) (24) (25) (16) (22) (23) (24) (25) 15,254 1,742 16,996 16,916 790 17,706 16,616 503 17,119 16,943 19,470 18,937 6,798 888 1,729 1,948 3,951 797 1,355 1,862 3,924 1,050 1,094 2,197 28,306 27,435 27,202 4,268 10,996 4,428 44 77,271 97,007 142,309 3,004 1,247 2,387 236 9,046 581 16,501 61,642 2,638 1,689 2,987 193 11,632 510 19,649 63,970 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) and retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 2 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 89 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Cash flow statement 5 Further information Note (30) 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) 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 90 2021 832 2,117 847 840 – 268 2,735 171 7,274 7,274 – 3,689 393 – 80 664 – 3,934 – 6,646 – 1,092 – 7,738 – 7,738 20201 889 3,161 342 422 – 54 – 652 17 4,125 50 4,175 – 2,285 132 – 1,073 233 – 1,189 – 4,182 – 96 – 4,278 – 76 – 4,354 RWE Annual Report 2021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) 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 Cash and cash equivalents at end of the reporting period as per the consolidated balance sheet Note (30) 2021 – 184 – 730 16,485 – 14,114 1,457 1,457 993 58 1,051 4,774 4,774 5,825 5,825 20201 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 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 91 RWE Annual Report 2021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 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 Debt instruments measured at fair value through other compre- hensive income Used for hedging purposes Note (20) Balance at 1 Jan 2020 prior to adjustment1 Adjustment1 Balance at 1 Jan 20202 Capital  paid in Dividends paid Income2 Other comprehensive income2 Total comprehensive income2 Other changes 1,574 2,385 1,574 157 2,385 1,844 Balance at 1 Jan 20212 1,731 4,229 Capital paid out Dividends paid Income Other comprehensive income Total comprehensive income Other changes 8,908 – 348 8,560 – 11 – 492 1,051 – 682 369 – 123 8,303 – 575 721 2,277 2,998 – 21 1,097 1,097 – 366 – 366 731 62 62 45 45 19 19 64 – 29 – 29 35 2,955 2,955 – 222 – 222 – 875 1,858 – 3,493 – 3,493 – 604 – 2,239 Balance at 31 Dec 2021 1,731 4,229 10,705 793 1 Restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 2 Some prior– year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 92 RWE AG share–  holders’ interest 16,964 – 348 16,616 1,990 – 492 1,051 – 1,251 – 200 – 998 16,916 – 575 721 – 1,183 – 462 – 625 15,254 Non–  controlling interests Total 503 503 162 – 64 59 – 42 17 172 790 – 175 – 155 111 100 211 1,071 1,742 17,467 – 348 17,119 2,152 – 556 1,110 – 1,293 – 183 – 826 17,706 – 175 – 730 832 – 1,083 – 251 446 16,996 RWE Annual Report 2021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 The Executive Board of RWE AG is responsible for the preparation, completeness and accuracy of the consolidated financial statements and the Group review of operations, RWE AG, recorded in Commercial Register B of the Essen District Court under HRB 14525 which is combined with the review of operations of RWE AG. and headquartered at RWE Platz 1 in 45141 Essen, Germany, is the parent company of the RWE Group (‘RWE’ or ‘Group’). RWE generates electricity from renewable and conventional We employ internal control systems, uniform groupwide directives, and programmes for sources, primarily in Europe and the USA. basic and advanced staff training to ensure that the consolidated financial statements and combined review of operations are adequately prepared. Compliance with legal regulations The consolidated financial statements for the period ended 31 December 2021 were and the internal guidelines as well as the reliability and viability of the control systems are approved for publication on 3 March 2022 by the Executive Board of RWE AG. The continuously monitored throughout the Group. statements were prepared in accordance with the International Financial Reporting Standards (IFRSs) applicable in the European Union (EU), as well as in accordance with In line with the requirements of the German Corporate Control and Transparency Act the supplementary accounting regulations applicable pursuant to Sec. 315e, Para. 1 of the (KonTraG), the Group’s risk management system enables the Executive Board to identify risks German Commercial Code (HGB). The previous year’s figures were calculated according to at an early stage and take countermeasures, if necessary. the same principles. A statement of changes in equity has been disclosed in addition to the income statement, pendent auditors’ report are discussed in detail by the Audit Committee and at the Supervi- the statement of comprehensive income, the balance sheet and the cash flow statement. sory Board’s meeting on financial statements with the independent auditors present. The consolidated financial statements, the combined review of operations, and the inde- The Notes also include segment reporting. Scope of consolidation Several balance sheet and income statement items have been combined in the interests of clarity. These items are stated and explained separately in the Notes to the financial In addition to RWE AG, the consolidated financial statements contain all material German statements. The income statement is structured according to the nature of expense method. and foreign companies which RWE AG controls directly or indirectly. In determining whether The consolidated financial statements have been prepared in euros. Unless specified consortial and management contracts and potential voting rights are also taken into there is control, in addition to voting rights, other rights in company, inter-company, otherwise, all amounts are stated in millions of euros (€ million). Due to calculation procedu- consideration. res, rounding differences may occur. These consolidated financial statements were prepared for the fiscal year from 1 January ments are accounted for using the equity method or as joint operations. Material associates are accounted for using the equity method, and principal joint arrange- to 31 December 2021. Associates are companies on which RWE AG exercises a significant influence on the basis of voting rights of 20 % up to and including 50 % or on the basis of contractual agreements. 93 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In classifying joint arrangements which are structured as independent vehicles, as joint As in the previous year, two companies are presented as joint operations. Of these, Greater operations or as joint ventures, other facts and circumstances – in particular delivery relation- Gabbard Offshore Winds Limited, UK, is a material joint operation of the RWE Group. ships between the independent vehicle and the parties participating in such – are taken into Greater Gabbard holds a 500 MW offshore wind farm, which RWE operates together with consideration, in addition to the legal form and contractual agreements. Scottish and Southern Energy (SSE) Renewables Holdings. RWE owns 50 % of the shares and receives 50 % of the power generated (including green power certificates). The wind farm Investments in subsidiaries, joint ventures, joint operations or associates which are of secon- is part of the Offshore Wind segment. dary importance from a Group perspective are accounted for in accordance with IFRS 9. First-time consolidation and deconsolidation generally take place when control is obtained The list of Group shareholdings pursuant to Sec. 313, Para. 2 of the German Commercial or lost. Code (HGB) is presented on pages 184 et seqq. The following summaries show the changes in the number of fully-consolidated companies amounting to €186 million, which were reported in other operating income (previous year: as well as associates and joint ventures accounted for using the equity method: €13 million). Furthermore, in the previous year a deconsolidation gain of €154 million on Sales of shares which led to a change of control resulted in sales proceeds from disposals the sale of discontinued operations was recognised in the ‘income from discontinued operations’ line item on the income statement. Number of fully consolidated companies Germany Abroad 1 Jan 2021 First– time consolidation Deconsolidation Mergers 31 Dec 2021 55 5 – 2 – 3 55 197 39 – 29 – 2 205 Total 252 44 – 31 – 5 260 Number of companies accounted for using the equity method Germany Abroad Total 1 Jan 2021 Acquisitions Disposals Other changes 31 Dec 2021 11 11 20 1 – 2 1 20 31 1 – 2 1 31 94 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Acquisitions An update of the figures reported during first-time consolidation was performed during the period under review and resulted in the following adjustments: Due to better understanding Nordex wind and solar projects. In early November 2020, RWE completed the acquisition of the fair value of principally operating rights, the fair value of net assets stated upon of 100 % of the shares in the companies NXD HOLDCO B.V. and NXD France SAS and thus first-time consolidation was reduced by €76 million, from €267 million to €191 million. As a gained control of the European development operations of the wind turbine manufacturer result, the goodwill recognised upon first-time consolidation increased by €76 million to Nordex. Since then, the names of the acquired companies have been changed to RWE €184 million. Renewables HoldCo B.V. and RWE Renouvelables France SAS. The status at initial consolidation is presented in the following table as at 31 December 2020: Group’s revenue and earnings after initial consolidation. In the previous year, the acquired operations did not make significant contributions to the Balance-sheet items € million Non-current assets Current assets Non-current liabilities Current liabilities Net assets Purchase price Goodwill The purchase price (excluding €21 million in redeemed shareholder loans) amounted to €375 million and was paid exclusively in cash and cash equivalents. Shareholding in Rampion Renewables Ltd. increased to 100 %. On 1 April 2021, RWE acquired the roughly 40 % share in Rampion Renewables Limited (‘RRL’), UK, which had been held by E.ON until then. Consequently, RWE obtained control over RRL and its subsidiary Rampion Offshore Wind Limited, in which RRL holds a 50.1 % stake. As a result of the transac- tion, RWE became the majority owner of the UK offshore wind farm Rampion, which has been fully consolidated since 1 April 2021. This transaction does not represent the acquisi- tion of a business in the sense of IFRS 3 and resulted in an increase of €1,010 million in property, plant and equipment and of €1,105 million in intangible assets. There was no effect on earnings. The purchase price for the approximately 40 % share in RRL was already paid in December 2020. The 400-MW wind farm is located off the coast of Sussex and has been operating commercially since 2018. IFRS carrying amounts (fair value) at initial consolidation (as at 31 Dec 2020) 329 56 6 267 375 108 95 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information King’s Lynn power station. 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. Disposals, disposal groups, assets held for sale and discontinued operations Sale of a 75 % stake in the onshore wind farms Stella, Cranell, East Raymond and West Raymond. In January 2021, the sale of a total of 75 % of the shares in the three onshore The initial accounting of the business combination from the previous year is presented in the wind farms Stella, Cranell and East Raymond in Texas was completed. In total, 75 % of the following table, together with the assumed assets and liabilities: shares in West Raymond were sold in August 2021. In this transaction, 51 % of the shares 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 were sold to Algonquin Power Fund (America) Inc., USA, a subsidiary of Algonquin Power & Utilities Corp., Canada, and another 24 % of the shares to the UK investment firm Greencoat Capital LLP. The underlying contracts were concluded in December 2020. As of 31 Decem- ber 2020, the assets and liabilities of the four wind farms were thus reported as ‘held for 125 sale’ in the balance sheet. 5 9 88 33 33 The divested wind farms were assigned to the Onshore Wind / Solar segment. Upon comple- tion of the transaction in January and August 2021, RWE deconsolidated the above wind farms and reported its remaining 25 % stake as an investment accounted for using the equity method. The gain on deconsolidation amounted to €156 million and was recognised in the ‘other operating income’ line item on the income statement. Additionally, in relation to the derecognition of a commodity derivative in this transaction, a current expense of €34 million reported under ‘other operating expenses’ is also taken into account. In the previous year, the company contributed €25 million to the Group’s revenue and €12 million to the Group’s earnings after its initial consolidation. Sale of 100 % of the shares in Energies France and Investerg to KELAG. At the end of April 2021, RWE sold 100 % of the shares in Energies France, S.A.S., France. The gain on Excluding €80 million in redeemed shareholder loans, the purchase price amounted to deconsolidation amounted to €9 million and was recognised in the ‘other operating income’ €33 million, which was paid exclusively in cash and cash equivalents during the previous year. line item on the income statement. RWE also sold 100 % of the shares in Investerg – Investimentos em Energias, SGPS, Lda., Portugal, to the Austrian energy utility KELAG at the end of September 2021. The gain on deconsolidation amounted to €7 million and was recognised in the ‘other operating income’ line item on the income statement. 96 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Upon completion of these two transactions that were agreed in December 2020, KELAG Sale of the grid connection for the Triton Knoll offshore wind farm. In order to comply acquired twelve French hydroelectric stations from RWE with a combined generation with competition law requirements, RWE must sell the grid connection for the Triton Knoll capacity of 45 MW, as well as the Portuguese run-of-river operations and some wind offshore wind farm. The book value of the grid connection, which consists exclusively of pro- turbines with a total generation capacity of 20 MW (pro-rata share of RWE). Energies perty, plant and equipment, is reported as ‘held for sale’ in the balance sheet as of 31 De- France was part of the Hydro  /Biomass / Gas segment, while Investerg was assigned to cember 2021, in the amount of €657 million. This asset held for sale is assigned to the Off- Onshore Wind / Solar. KELAG is an associate company of RWE. shore Wind segment. The sale is expected to be completed in the latter half of 2022. Sale of the grid connection for the Rampion offshore wind farm. In order to comply with competition law requirements, RWE was obligated to sell the grid connection for the Rampi- on offshore wind farm, which had been fully consolidated since 1 April 2021. Sale of the grid connection, which was part of the Offshore Wind segment, was completed on 19 November 2021. No disposal result was recorded. Disposal of parts of the Belectric Group. In December 2021, RWE sold the companies BELECTRIC GmbH, Belectric France S.à.r.l., Belectric Israel Ltd., Belectric Italia s.r.l. and Be- lectric Solar Ltd. to the Elevion Group B.V., and thus disposed of its business for services in the fields of engineering, procurement, construction, operation and maintenance of solar plants for third parties in Germany, France, Israel, Italy and the United Kingdom. The Elevion Group is an energy services provider headquartered in the Netherlands, which is part of the ČEZ Group. The gain on deconsolidation amounted to €4 million and was recognised in the ‘other operating income’ line item on the income statement. The divested companies were part of the segment Onshore Wind / Solar. 97 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Východoslovenská energetika Holding a.s. (VSEH). On 21 August 2020, RWE sold the Key figures of the discontinued operations 2020 2019 shares in its fully consolidated investment in the Slovak power and gas utility Východoslo- € million venská energetika Holding a.s. (VSEH), which was previously stated as part of ‘innogy – discontinued operations’, to E.ON. The deconsolidation gain in the previous year amounted to €154 million and was stated in the ‘income from discontinued operations’ line item on the income statement. Revenue1 Other income2 Expenses3 Major key figures of the activities of the discontinued operations deconsolidated as of 21 August 2020 are presented in the following tables: Key figures of the disposal group 31 Dec 2019 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 € 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 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). 405 734 8 1,147 Georgia Biomass Holding LLC. The sale of Georgia Biomass Holding LLC, which had been contractually agreed on 18 June 2020, was completed on 31 July 2020. Georgia Biomass Holding LLC was responsible for RWE’s biomass business in the USA and was part of the Hydro / Biomass / Gas segment. The deconsolidation gain on this transaction amounted to 127 €13 million, which was recognised in the ‘other operating income’ line item on the income statement in the previous year. Seabreeze II installation ship. In April 2020, the Seabreeze II offshore installation ship (jack-up vessel) and the related equipment was sold and transferred to SPIC Ronghe International Financial Leasing Co. Ltd. The ship was part of the Offshore Wind segment. In the previous year, this transaction resulted in a gain in the medium double-digit million euro range, which was recognised in the ‘other operating income’ line item on the income statement for that period. 9 225 131 365 145 98 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Consolidation principles Expenses and income as well as receivables and payables between consolidated companies are eliminated; intra-group profits and losses are eliminated. 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, For investments accounted for using the equity method, goodwill is not reported separately, subsidiaries whose fiscal years do not end on the Group’s balance-sheet date (31 Decem- but rather included in the value recognised for the investment. In other respects, the ber) prepare interim financial statements as of this date. Two subsidiaries have a different consolidation principles described above apply analogously. If impairment losses on the balance-sheet date of 31 March (previous year: three). Different fiscal years compared to equity value become necessary, we report such under income from investments accounted the calendar year stem from tax-related reasons or country-specific regulations. 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. Business combinations are reported according to the acquisition method. This means that capital consolidation takes place by offsetting the purchase price, including the amount of the non- controlling interests, against the acquired subsidiary’s revalued net assets at the Foreign currency translation time of acquisition. In doing so, the non-controlling interests can either be measured at the In their individual financial statements, the companies measure non-monetary foreign prorated value of the subsidiary’s identifiable net assets or at fair value. The subsidiary’s currency items at the balance-sheet date using the exchange rate in effect on the date they identifiable assets, liabilities and contingent liabilities are measured at full fair value, were initially recognised. Monetary items are converted using the exchange rate valid on the regardless of the amount of the non-controlling interests. Intangible assets are reported balance-sheet date. Exchange rate gains and losses from the measurement of monetary separately from goodwill if they are separable from the company or if they stem from a balance-sheet items in foreign currency occurring up to the balance-sheet date are contractual or other right. In accordance with IFRS 3, no new restructuring provisions are recognised on the income statement. recognised within the scope of the purchase price allocation. If the purchase price exceeds the revalued prorated net assets of the acquired subsidiary, the difference is capitalised as Functional foreign currency translation is applied when converting the financial statements goodwill. If the purchase price is lower, the difference is included in income. of companies outside of the Eurozone. As the principal foreign enterprises included in the consolidated financial statements conduct their business activities independently in their In the event of deconsolidation, the related goodwill is derecognised with an effect on national currencies, their balance-sheet items are translated into euros in the consolidated income. Changes in the ownership share which do not alter the ability to control the subsidia- financial statements using the average exchange rate prevailing on the balance-sheet date. ry are recognised without an effect on income. By contrast, if there is a change in control, This also applies for goodwill, which is viewed as an asset of the economically autonomous the remaining shares are remeasured at fair value with an effect on income. foreign entity. We report differences to previous-year translations in other comprehensive income without an effect on income. Expense and income items are translated using annual average exchange rates. When translating the adjusted equity of foreign companies accounted for using the equity method, we follow the same procedure. 99 RWE Annual Report 2021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 Goodwill is not amortised; instead it is subjected to an impairment test once every year, or translations: Exchange rates in € 1 US dollar 1 British pound 100 Czech korunas 1 Polish zloty 1 Danish crown 1 Swedish crown 1 Norwegian crown Accounting policies Average Year-end 2021 2020 31 Dec 2021 31 Dec 2020 0.85 1.16 3.90 0.22 0.13 0.10 0.10 0.87 1.12 3.77 0.22 0.13 0.10 0.09 0.88 1.19 4.02 0.22 0.13 0.10 0.10 0.81 1.11 3.81 0.22 0.13 0.10 0.10 more frequently if there are triggers for an 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 develop- ment costs are amortised over the period during which the products are expected to be sold. Research expenditures are recognised as expenses in the period in which they are incurred. An impairment loss is recognised for an intangible asset if the recoverable amount of the asset is less 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 Intangible assets are accounted for at amortised cost. With the exception of goodwill, all exceeds the recoverable amount, the allocated goodwill is initially written down by the intangible assets have finite useful lives and are amortised using the straight-line method. difference. Impairment losses which must be recognised in addition to this are taken into Useful lives and methods of amortisation are reviewed on an annual basis. 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 Software for commercial and technical applications is amortised over three to five years. to exist, a write-back to intangible assets is performed. The increased carrying amount ‘Operating rights’ refer to the entirety of the permits and approvals required for the opera- resulting from the write-back may not, however, exceed the amortised cost. Impairment tion of a power plant. Such rights are generally amortised over the economic life of the losses on goodwill are not reversed. power plant, using the straight-line method. Capitalised customer relations are amortised over a maximum period of up to 18 years. 100 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Property, plant and equipment is stated at depreciated cost. Borrowing costs are received lease incentives. Right-of-use assets are depreciated using the straight-line capitalised as part of the asset’s cost, if they are incurred directly in connection with the method over the lease term or the expected useful life, whichever is shorter. acquisition or production of a ‘qualified asset’. What characterises a qualified asset is that a considerable period of time is required to prepare it for use or sale. If necessary, the cost of For short-term leases and leases for low-value assets, lease instalments are recognised as property, plant and equipment may contain the estimated expenses for the decommissio- an expense over the lease term. For operating leases of which RWE is the lessor, the mini- ning of plants or site restoration. Maintenance and repair costs are recognised as expenses. mum lease instalments are recognised as income over the lease term. With the exception of land and leasehold rights, as a rule, property, plant and equipment is Impairment losses and write-backs on property, plant and equipment are recognised depreciated using the straight-line method, unless in exceptional cases another deprecia- according to the principles described for intangible assets. tion method is better suited to the usage pattern. The depreciation methods are reviewed annually. We calculate the depreciation of RWE’s typical property, plant and equipment Investments accounted for using the equity method are initially accounted for at cost and according to the following useful lives, which apply throughout the Group and are also thereafter based on the carrying amount of their prorated net assets. The carrying amounts reviewed annually: Useful life in years Buildings Technical plants Thermal power plants Wind turbines Gas and water storage facilities Mining facilities Other renewable generation facilities are increased or reduced annually by prorated profits or losses, dividends and all other changes in equity. Goodwill is not reported separately, but rather included in the recognised value of the investment. Goodwill is not amortised. An impairment loss is recognised for 7 – 50 investments accounted for using the equity method, if the recoverable amount is less than the carrying amount. 6 – 40 Up to 25 10 – 60 3 – 25 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 comprehensive 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 In relation to lignite mining and generation, the decommissioning data from the Act on Coal their classification. Gains and losses on sales of equity instruments, for which the option to Phaseout are taken into consideration in determining the useful life spans. state changes in fair value in other comprehensive income is exercised, remain in equity and Property, plant and equipment also include right-of-use assets resulting from leases of credit losses is recognised through profit or loss for debt instruments that are recognised at which RWE is the lessee. These right-of-use assets are measured at cost. The cost results fair value through other comprehensive income. The changes reported in other comprehen- from the present value of the lease instalments, adjusted to take into account advance sive income are recognised with an effect on earnings upon the sale of these instruments. are not reclassified to the income statement. An impairment in the amount of the expected payments, initial direct costs and potential dismantling obligations and corrected for 101 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Receivables are comprised of financial receivables, trade accounts receivable and other Insofar as inventories are not acquired primarily for the purpose of realising a profit on a receivables. Aside from financial derivatives, receivables and other assets are stated at short-term resale transaction, they are carried at the lower of cost or net realisable value. amortised cost minus a risk provision in the amount of the expected losses. Production costs reflect the full costs directly related to production; they are determined Loans reported under financial receivables are stated at amortised cost minus a risk include adequate portions of required materials and production overheads. They also provision in the amount of the expected losses. Loans with interest rates common in the include production- related depreciation. Borrowing costs, however, are not capitalised as market are shown on the balance sheet at nominal value; as a rule, however, non-interest part of the cost. The determination of cost is generally based on average values. The usage or low-interest loans are disclosed at their present value discounted using an interest rate of excavated earth for lignite mining is calculated using the ‘first in – first out’ method (FIFO). based on normal capacity utilisation and, in addition to directly allocable costs, they also commensurate with the risks involved. 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 If the net realisable value of inventories written down in earlier periods has increased, the reversal of the write-down is recognised as a reduction of the cost of materials. Nuclear fuel assemblies are stated at amortised cost. Depreciation is determined by operation and capacity, based on consumption and the reactor’s useful life. IFRS financial statements and tax bases, and from consolidation procedures. Deferred tax Inventories which are acquired primarily for the purpose of realising a profit on a short-term assets also include tax reduction claims resulting from the expected utilisation of existing resale transaction are recognised at fair value less costs to sell. Changes in value are loss carryforwards in subsequent years. Deferred taxes are capitalised if it is sufficiently recognised with an effect on income. certain that the related economic advantages can be used. Their amount is assessed with regard to the tax rates applicable or expected to be applicable in the specific country at the Securities classified as current marketable securities essentially consist of fixed-interest time of realisation. The tax regulations valid or adopted as of the balance- sheet date are key securities which have a maturity of more than three months and less than one year from the considerations in this regard. Deferred tax assets and deferred tax liabilities are netted out for date of acquisition. Securities are measured at fair value through profit or loss or at fair value each company and / or tax group. through other comprehensive income. The transaction costs directly associated with the acquisition of these securities are included in the initial measurement, which occurs on Inventories are assets which are held for sale in the ordinary course of business (finished their settlement date. Unrealised gains and losses are recognised through profit or loss or goods and goods for resale), which are in the process of production (work in progress – goods other comprehensive income, with due consideration of any deferred taxes depending on and services) or which are consumed in the production process or in the rendering of services the underlying measurement category. An impairment in the amount of the expected credit (raw materials including nuclear fuel assemblies and excavated earth for lignite mining). losses is recognised 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 disposal of such instruments. 102 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Cash and cash equivalents consist of cash on hand, demand deposits and current All non-current provisions are recognised at their prospective settlement amount, which is fixed-interest securities with a maturity of three months or less from the date of acquisition. discounted as of the balance-sheet date. In the determination of the settlement amount, any cost increases likely to occur up until the time of settlement are taken into account. Assets are stated under Assets held for sale if they can be sold in their present condition and their sale is highly probable within the next twelve months. Such assets may be certain If necessary, the cost of property, plant and equipment may contain the estimated expenses non-current assets, asset groups (‘disposal groups’) or operations (‘discontinued opera- for the decommissioning of plants or site restoration. Decommissioning, restoration and tions’). Liabilities intended to be sold in a transaction together with assets are a part of a similar provisions are recognised for these expenses. If changes in the discount rate or disposal group or discontinued operations, and are reported separately under Liabilities changes in the estimated timing or amount of the payments result in changes in the held for sale. provisions, the carrying amount of the respective asset is increased or decreased by the corresponding amount. If the decrease in the provision exceeds the carrying amount, the Non-current assets held for sale are no longer depreciated or amortised. They are recogni- excess is recognised immediately through profit or loss. sed at fair value less costs to sell, as long as this amount is lower than the carrying amount. As a rule, releases of provisions are credited to the expense account on which the provision Gains or losses on the valuation of specific assets held for sale and of disposal groups are was originally recognised. stated under income from continuing operations until final completion of the sale. Gains or losses on the valuation of discontinued operations and on certain assets of a discontinued Provisions for pensions and similar obligations are recognised for defined benefit plans. operation, which are not subject to the valuation rules pursuant to IFRS 5, are stated under These are obligations of the company to pay future and ongoing post-employment benefits income from discontinued operations. to entitled current and former employees and their surviving dependents. In particular, the obligations refer to retirement pensions. Individual commitments are generally oriented to The stock option plans granted by RWE to executives and corporate bodies are accounted the employees’ length of service and compensation. for as cash-settled share-based payment. At the balance-sheet date, a provision is recognised in the amount of the prorated fair value of the payment obligation. Changes Provisions for defined benefit plans are based on the actuarial present value of the respec- in the fair value are recognised with an effect on income. The fair value of options is determi- tive obligation. This is measured using the projected unit credit method. This method not ned using generally accepted valuation methodologies. only takes into account the pension benefits and benefit entitlements known as of the balance-sheet date, but also anticipated future increases in salaries and pension benefits. Provisions are recognised for all legal or constructive obligations to third parties which The calculation is based on actuarial reports, taking into account appropriate biometric exist on the balance-sheet date and stem from past events which will probably lead to an parameters (for Germany, in particular the ‘Richttafeln 2018 G’ by Klaus Heubeck, and the outflow of resources, and the amount of which can be reliably estimated. Provisions are Standard SAPS Table S2PA of the respective year for the United Kingdom, taking into conside- carried at their prospective settlement amount and are not offset against reimbursement ration future changes in mortality rates). The provision derives from the balance of the claims. If a provision involves a large number of items, the obligation is estimated by actuarial present value of the obligations and the fair value of the plan assets. The service weighting all possible outcomes by their probability of occurrence (expected value method). cost is disclosed in staff costs. Net interest is included in the financial result. 103 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Gains and losses on the revaluation of net defined benefit liability or asset are fully recogni- sed in the fiscal year in which they occur. They are reported outside of profit or loss, as a component of other comprehensive income in the statement of comprehensive income, and are immediately assigned to retained earnings. They remain outside profit or loss in subsequent periods as well. 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 obligation is not covered with allowances that are available or have been purchased forward, the provision for this portion is measured using the market price of the emission allowances or certificates for renewable energies on the reporting date. In the case of defined contribution plans, the enterprise’s obligation is limited to the amount it contributes to the plan. Contributions to the plan are reported under staff costs. Liabilities consist of financial liabilities, trade accounts payable, income tax liabilities Waste management provisions in the nuclear energy sector are based on obligations under including transaction costs and are carried at amortised cost in the periods thereafter public law, in particular the German Atomic Energy Act, and on restrictions from operating (except for derivative financial instruments). Lease liabilities are measured at the present licenses. These provisions are measured using estimates, which are based on and defined in value of the future lease payments. For subsequent measurements, the lease payments are contracts as well as on information from internal and external specialists (e. g. experts). divided into the financing costs and repayment portion of the outstanding debt. Financing costs are distributed over the lease term in such a manner that a steady interest rate is and other liabilities. Upon initial recognition, these are generally stated at fair value Obligations existing as of the balance-sheet date and identifiable when the balance sheet is created for the outstanding debt. being 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 provisi- If uncertain income tax items are recognised in income tax liabilities because they are ons must be recognised due to obligations under public law, such as the German Federal probable, the former are generally measured at the most likely amount. Measurement at Mining Act, and formulated, above all, in operating schedules and water law permits. expected value is only considered in exceptional cases. Provisions are generally fully related to the degree of mining in question. Such provisions are measured at full expected cost or according to estimated compensation payments. Cost Moreover, other liabilities also include contract liabilities. A contract liability is the estimates are based on external expert opinions to a significant extent. obligation of the Group to transfer goods or services to a customer, for which we have already received consideration or for which the consideration is already due. 104 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Government grants provided in relation to the acquisition of an asset are not deducted from The purpose of hedges of a net investment in foreign operations (net investment hedges) is the cost of the subsidised asset; they are reported as deferrals under other liabilities. These to hedge the currency risk from investments with foreign functional currencies. With the deferrals are reversed with an effect on income over the economic life of the subsidised asset. exception of hedging costs, unrealised gains and losses from such hedges are recognised Derivative financial instruments are recognised as assets or liabilities and measured at fair value, regardless of their purpose. Changes in this value are recognised with an effect on Hedging relationships must be documented in detail and meet the following effectiveness in other comprehensive income until disposal of the foreign operation. income, unless the instruments are used for hedge accounting purposes. In such cases, requirements: recognition of changes in the fair value depends on the type of hedging transaction. Fair value hedges are used to hedge assets or liabilities carried on the balance sheet • the value change of hedging relationship is not dominated by the credit risk, and against the risk of a change in their fair value. The following applies: changes in the fair • the hedge ratio is the same as that resulting from the quantities used within the scope of • there is an economic relationship between the hedged item and the hedging instrument, value of the hedging instrument and the fair value of the respective underlying transactions risk management. are recognised in the same line item on the income statement. Hedges of unrecognised firm commitments are also recognised as fair value hedges. Changes in the fair value of the firm Only the effective portion of a hedge is recognised in accordance with the preceding rules. commitments with regard to the hedged risk result in the recognition of an asset or liability The ineffective portion is recognised immediately on the income statement with an effect with an effect on income. on income. Cash flow hedges are used to hedge the risk of variability in future cash flows related to an Contracts on the receipt or delivery of non-financial items in accordance with the company’s asset or liability carried on the balance sheet or related to a highly probable forecast expected purchase, sale or usage requirements (own-use contracts) are not accounted for transaction. If a cash flow hedge exists, unrealised gains and losses from the hedging as derivative financial instruments, but rather as executory contracts. If the contracts instrument are initially stated as other comprehensive income. Such gains or losses are only contain embedded derivatives, the derivatives are accounted separately from the host included on the income statement when the hedged underlying transaction has an effect on contract, insofar as the economic characteristics and risks of the embedded derivatives income. If forecast transactions are hedged and such transactions lead to the recognition of are not closely related to the economic characteristics and risks of the host contract. a financial asset or financial liability in subsequent periods, the amounts that were recogni- Written options to buy or sell a non-financial item which can be settled in cash are not sed in equity until this point in time are recognised on the income statement in the period own-use contracts. during which the asset or liability affects the income statement. If the transactions result in 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 cost of the asset or liability. 105 RWE Annual Report 2021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 Management judgements in the application of accounting policies. Management judge- will probably not lead to an outflow of economic benefits or the amount of which cannot be ments are required in the application of accounting policies. In particular, this pertains to the measured reliably. Contingent liabilities are only recognised on the balance sheet if they were following aspects: assumed within the framework of a business combination. The amounts disclosed in the Notes correspond to the best possible estimate of the settlement amount at the balance-sheet date. • With regard to certain contracts, a decision must be made as to whether they are to be treated as derivatives or as so-called own-use contracts, and be accounted for as Contingent assets are possible assets resulting from past events, the existence of which executory contracts. must be confirmed by future events that are not under the full control of RWE. Contingent • Financial assets are classified by contractual cash flows and applied business model. assets are not stated in the balance sheet. The volumes reported in the Notes correspond to Whereas the contractual cash flows are determined by the characteristics of the estimates of the possible financial ramifications as of the balance-sheet date. financial instruments, the business model is based on the Group’s internal requirements As explained on page 37, renewable energy projects in the USA are primarily subsidised via • With regard to assets held for sale, it must be determined if they can be sold in their tax credits and tax benefits (hereinafter referred to jointly as tax items). Within the frame- current condition and if the sale of such is highly probable in the next twelve months. If both work of so-called tax equity financing, tax equity investors participate directly in financing conditions apply, the assets and any related liabilities must be reported and measured as the generation facilities of individual project companies. Due to its financing character, the assets or liabilities held for sale, respectively. relating to the portfolios of financial instruments. capital contributed by the tax equity investor is reported under financial liabilities, in the amount of the outstanding repayment. Management estimates and judgements. Preparation of consolidated financial state- ments pursuant to IFRS requires assumptions and estimates to be made, which have an Repayment of interest and capital for the tax equity liability occurs primarily via the direct impact on the recognised value of the assets and liabilities carried on the balance sheet, on allocation of the tax items generated by the project to the tax equity investor, which can then income and expenses and on the disclosure of contingent liabilities. apply the items in relation to its own tax accounting. In addition to this, repayment of interest and capital also occurs in cash. Amongst other things, these assumptions and estimates relate to the accounting and measurement of provisions. With regard to non-current provisions, the discount factor to The tax equity arrangement and the related obligation to maintain proper operations is be applied is an important estimate, in addition to the amount and timing of future cash treated similar to a contract for services. The income resulting from the tax items is recor- flows. The discount factor for pension obligations is determined on the basis of yields on ded under other operating income, with this income realised using the straight-line method high-quality, fixed-rate corporate bonds on the financial markets as of the balance-sheet over the anticipated duration of the tax equity contracts. In this regard, linear realisation of date. The new government coalition consisting of the SPD, the Green Party and the FDP the income is capped at the amount of income that will most likely be generated during the wishes to accelerate Germany’s phaseout of coal, in the interests of climate protection. contract, and any amounts above and beyond this are only recognised up to the amount of 2030 is stated as the desired final date in the coalition agreement. This is eight years earlier income that is actually generated. than envisaged in the current legal roadmap. The accounting policies continue to be based on the 2038 decommissioning date as foreseen in the current legal regulations. 106 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The rules governing valuation allowances for financial assets under IFRS 9 stipulate that the As of the date of preparation of the consolidated financial statements, it is not presumed expected credit losses must be determined. The valuation allowance is based on information that there will be any material changes compared to the assumptions and estimates. from within and outside the Group. The impairment test for goodwill and non-current assets is based on certain assumptions access to the capital market. The goal is to be in a position to refinance maturing debts and pertaining to the future, which are regularly adjusted. Property, plant and equipment is finance the operating activities at all times. Maintaining a solid rating and a positive tested for indications of impairment on each cut-off date. Based on the respective business operating cash flow from continuing activities serve this purpose. Capital management. The focus of RWE’s financing policy is on ensuring uninterrupted models, the anticipated effects of the coronavirus pandemic did not make it necessary to conduct any impairment tests. The management of RWE’s capital structure is oriented towards a leverage factor of three or less. This indicator is calculated by adding material non-current provisions, with the Power plants are grouped together as a cash-generating unit if their production capacity exception of mining provisions, to net financial debt and comparing the resulting figure to and fuel needs are centrally managed as part of a portfolio, and it is not possible to ascribe the adjusted EBITDA of the core business. RWE’s liabilities of relevance to net debt primarily individual contracts and cash flows to the specific power plants. consist of (hybrid) bonds, short-term borrowing and provisions for pensions, nuclear waste Upon first-time consolidation of an acquired company, the identifiable assets, liabilities and contingent liabilities are recognised at fair value. Determination of the fair value is based on valuation methods which require a projection of anticipated future cash flows. management and wind farms. During the reporting period, RWE‘s net debt was mainly influenced by 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 Deferred tax assets are recognised if realisation of future tax benefits is probable. Actual positions resulting from the daily revaluation of active contracts. However, their influence on future development of income for tax purposes and hence the realisability of deferred tax cash flows is temporary and ends once the transactions triggering the payments are assets, however, may deviate from the estimation made when the deferred taxes are realised. Conversely, capital expenditures, in particular on wind and solar power, increased capitalised. compared to the previous year. In total, net financial assets amounted to €9.1 billion on 31 December 2021 and were thus higher than at the end of 2020 (previous year: €6.9 bil- Further information on the assumptions and estimates upon which these consolidated lion). Furthermore, net debt provisions fell by €2.6 billion to €8.7 billion (previous year: financial statements are based can be found in the explanations of the individual items. €11.3 billion). On average, provisions have a very long duration; their level is primarily All assumptions and estimates are based on the circumstances and forecasts prevailing on tion of net debt/assets and net financial debt/assets is presented on page 62 of the review of the balance-sheet date. Furthermore, as of the balance-sheet date, realistic assessments of operations. In total, as of 31 December 2021, RWE‘s net assets amounted to €0.4 billion overall economic conditions in the sectors and regions in which RWE conducts operations (previous year: net debt of €4.4 billion). As of 31 December 2021, the leverage factor was are taken into consideration with regard to the prospective development of business. -0.1 (previous year: 1.7) and was thus below the planned ceiling. determined by external factors such as the general level of interest rates. A precise calcula- Actual amounts may deviate 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. 107 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information RWE’s credit rating is influenced by a number of qualitative and quantitative factors. These Even though a contract similar to contract for services is recognised, IFRS 15 is not directly include aspects such as the amount of cash flows and debt as well as market conditions, applicable as a tax equity contract does not fulfil the definition of a contract with a customer competition, and the political framework. Our hybrid bonds also have a positive effect on in the sense of IFRS 15. Instead, IFRS 15 is applied analogously, as per IAS 8.11 (a). In this our rating. The leading rating agency, Moody’s, classifies part of hybrid capital as equity. analogy, the contractually agreed capital payment is treated as the transaction price, while In March and April 2021, the rating agencies Fitch and Moody’s both raised their credit to the tax equity investor is treated as RWE’s performance obligation over time. As a result, rating for RWE by one notch. RWE’s long-term creditworthiness is now classified as BBB+ all income resulting from the tax items is recognised in other operating income; furthermo- (Fitch) and Baa2 (Moody’s), with a stable outlook. RWE’s short-term credit ratings are P-2 re, realisation of this income occurs using the straight-line method over the anticipated (previous year: P-3) and F1 (previous year: F2), respectively. duration of the tax equity contracts and is thus independent of the actual amount of the tax the maintenance of operations in the interests of generating the tax items to be transferred Changes in accounting regulations items generated during the reporting period in question. This method of realising the income results from linear performance over time, i. e. the amount paid by the tax equity investor is viewed as a transaction price, which is recognised pro-rata over the duration of The International Accounting Standards Board (IASB) has approved several amendments the relevant tax equity contract. to existing IFRSs, which are effective for the RWE Group as of fiscal 2021 due to EU endorsement: Compared to the previous accounting method, the approach described above primarily leads to a different accounting treatment of tax benefits, which stem from accelerated • Amendments to IFRS 4: Extension of the Temporary Exemption From Applying IFRS 9 depreciation in particular. Previously, these tax benefits were reported in taxes on income, in (2020) the amount of the tax benefits that were actually generated. Due to the change in the • Amendments to IAS 39, IFRS 4, IFRS 7, IFRS 9 and IFRS 16: Interest Rate Benchmark accounting method, the comparable figures for the previous year were adjusted accordingly. Reform – Phase 2 (2020) • Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond In fiscal 2021, RWE recognised tax benefits totalling €72 million in other operating income, 30 June 2021 (2021) which would have been reported as €38 million in taxes on income prior to the change in the accounting policy. The tax benefits recognised in income from investments accounted for These new regulations do not have any material effects on the RWE Group’s consolidated using the equity method amount to a total of €9 million. Prior to the change in the accoun- financial statements. ting policy, this figure would have been reported as €7 million under income from invest- ments accounted for using the equity method. Changes to the accounting of tax items in relation to tax equity contracts. At the beginning of fiscal 2021, the fundamental basis for the accounting of tax items in relation to tax equity financing arrangements was changed. In the new approach, the allocation of tax items to the tax equity investor is accounted for as a process similar to a sales transac- tion (see also page 106), in order to present the economic peculiarities of the US subsidy system more accurately and thus provide more relevant information regarding the econo- mic and financial consequences of this system. 108 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The following table shows the changes in the balance sheet as of 31 December 2020 and 1 January 2020: € million Investments accounted for using the equity method Deferred tax assets Assets held for sale Equity Non-current other liabilities Deferred tax liabilities Current other liabilities Liabilities held for sale 31 Dec 2020 before changes 31 Dec 2020 after changes 1 Jan 2020 before changes 1 Jan 2020 after changes 3,297 397 1,045 3,276 397 1,061 17,971 17,706 1,154 1,908 9,003 539 1,355 1,8831 9,046 581 3,281 689 1,274 17,467 862 2,164 11,588 510 3,252 680 1,274 17,119 1,094 2,197 11,632 510 1 Prior to consideration of retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). The following table shows the changes to the income statement for fiscal 2020: The retroactive application of changes to the accounting policy for tax equity agreements € million Other operating income Depreciation, amortisation and impairment losses Income from investments accounted for using the equity method Income from continuing operations before tax Taxes on income Income from continuing operations after tax Income Net income / income attributable to RWE AG shareholders Basic and diluted earnings per share in € Jan – Dec 2020 before changes Jan – Dec 2020 after changes 4,931 3,154 375 1,196 -363 833 1,054 995 1.56 4,977 3,136 381 1,265 -376 889 1,110 1,051 1.65 had an impact on currency translation adjustment in the statement of comprehensive income. The figure for fiscal 2020 is €26 million higher. The change had no effect on the cash flows from operating activities of continuing operations in fiscal 2020. The increase of €56 million in income from continuing operations in fiscal 2020 was offset by a decline of €18 million in depreciation, amortisation and impairment losses, a decline of €63 million in deferred taxes, a decline of €5 million in other non-cash income/expenses and a rise of €30 million in changes in working capital. 109 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information New accounting policies Notes to the Income Statement The IASB issued further standards and amendments to standards, which were not yet (1) Revenue mandatory in the EU in fiscal 2021. These standards and amendments to standards, which Revenue is recorded when the customer has obtained control over goods or services. are not expected to have any material effects on RWE’s consolidated financial statements, are listed below: 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 • IFRS 17 Insurance Contracts (2017) including Amendments to IFRS 17 (2020) commercial optimisation of generation dispatch is based on the net sale price, after • Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as deduction of the relevant material costs. By contrast, all other revenue from our generation Current or Non-current (2020) and Presentation of Financial Statements: Classification activities and the consumer business is reported on a gross basis. of Liabilities as Current or Non-current – Deferral of Effective Date (2020) • Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework Revenue contains state subsidies for the sale of green electricity and the refund of such to (2020) the state, including subsidies from contracts for differences, amounting to -€37 million • Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use (previous year: €51 million), which do not meet the definition of IFRS 15. These contracts for (2020) differences are used as a state subsidy mechanism within the framework of climate-protec- • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous tion measures and essentially result in a fixed price for the electricity that is sold, by offset- Contracts – Cost of Fulfilling a Contract (2020) ting positive and negative deviations (in so-called two-way contracts for difference) and • Annual Improvements to IFRS Standards 2018-2020 (2020) negative deviations (in so-called one-way contracts for difference) from a defined reference • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice State- price that is agreed with state contractual partners or the subsidy mechanism counterparty. ment 2: Disclosure of Accounting Policies (2021) • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: In the year under review, RWE generated external revenue with three large customers in the Definition of Accounting Estimates (2021) amount of €4,683 million, €2,475 million and €2,471 million (previous year: two large • Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities customers at €6,963 million and €1,544 million) in the Supply & Trading segment. arising from a Single Transaction (2021) • Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – During the year under review, revenues rose sharply compared to the previous year, in Comparative Information (2021) particular due to the steep increase in electricity prices. A breakdown of revenue by division, geographical region and product is contained in the segment reporting on pages 174 et seqq. The item ‘natural gas tax / electricity tax’ comprises the taxes paid directly by Group companies. 110 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Certain performance obligations of the RWE Group were not yet or not yet fully met by the To improve the presentation of the development of business, in the previous year unrealised end of the fiscal year. The €2,319 million in revenue due from these performance obligations and realised gains from contracts measured at fair value in the Supply & Trading segment (previous year: €3,154 million) is expected to be received over the following three years. The were stated as a net amount in income from derivative financial instruments. In the previous receipt of this revenue will depend on when these performance obligations to the customer year, net income totalled €3,613 million. In the year under review, a net expense was are met. It does not include future revenue from contracts with an original contractual term recognised, which is reported in expenses from derivative financial instruments under other of twelve months or less. (2) Other operating income Other operating income € million Income from own work capitalised Income from changes in product inventories Income from release of provisions Cost allocations / refunds Income from 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 operating expenses. In the reporting period, the miscellaneous operating income includes the statutory compen- sation of €880 million for the residual production volumes of RWE-owned nuclear power 2021 20201 plants which could no longer be used as a result of the accelerated German nuclear phaseout. 47 20 20 151 442 96 33 16 1,432 2,257 84 10 11 175 128 3,721 66 29 71 682 4,977 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. (3) Cost of materials Cost of materials € million Cost of raw materials and of goods for resale Cost of purchased services 2021 2020 16,589 1,124 17,713 8,539 1,275 9,814 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). The cost of materials primarily includes expenses for the input materials of power plants. Expenses for coal of €276 million (previous year: €75 million) were recognised at the market price prevailing at settlement. 111 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Impairments amounting to €25 million were recognised on excavated earth in the year (5) Depreciation, amortisation and impairment losses under review. These impairments were related to the impairment test conducted for the Garzweiler cash-generating unit. In the previous year, impairments of €140 million were Depreciation, amortisation and impairment losses 2021 20201 recognised for stock materials and coal inventories. These impairments were based on € million lower market prices and impairment tests performed for the cash-generating units Garz- Intangible assets weiler, Hambach, Inden and the hard coal-fired power stations (see page 113). Property, plant and equipment 180 2,193 2,373 156 2,980 3,136 During the year under review, the cost of materials rose significantly compared to the previous year, in particular due to the sharp increases in electricity and gas prices. 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). (4) Staff costs Staff costs € million Wages and salaries Cost of social security, pensions and other benefits The following impairments were included in depreciation, amortisation and impairment losses: 2021 2020 2,012 490 2,502 1,891 474 2,365 Impairments € million Intangible assets Property, plant and equipment 2021 20201 4 948 952 18 1,694 1,712 Number of employees 2021 2020 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise Employees covered by collective agreements and other employees Employees not covered by collective agreements Number of employees In full-time equivalents Number of employees In full-time equivalents 12,994 12,754 13,539 13,272 renewable energy in the USA (see commentary on pages 108 et seq.). RWE has entered into long-term CO2 hedging transactions in order to hedge generation positions for its lignite-fired power stations. As a result of the increase in CO2 prices, the fair value of these hedges has risen sharply, leading to an improvement in equity (other compre- 6,248 6,113 6,493 6,358 hensive income). Conversely, the value of the lignite-fired plants and opencast mines has 19,242 18,867 20,032 19,630 declined. The impairment test performed in 2021 in the Coal / Nuclear segment for the Garzweiler cash-generating unit resulted in a write-down of €729 million on property, plant and equipment (recoverable amount: €0.1 billion). Additionally, impairments of €26 million In contrast to the previous year, the number of employees and full-time equivalents are were recognised on property, plant and equipment outside of the Garzweiler cash-genera- reported for the year under review. The headcount figures do not include trainees. On ting unit. The Garzweiler cash-generating unit comprises the Niederaußem (K) and Neurath average, 710 trainees were employed (previous year: 669). This corresponds to the figure (F, G) power plant units, which – according to the law on coal phaseout – will remain online calculated in full-time equivalents. over the long term, and the Garzweiler opencast mine, along with the refining plants. With 112 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information the exception of the property and buildings reported at market value, the property, plant and (6) Other operating expenses equipment of the Garzweiler unit has thus been written down in full, as was already the case with the Hambach and Inden units. Other operating expenses € million 2021 2020 In the previous year, the impairment test for the Dutch Power Plant Portfolio cash- Maintenance and renewal obligations generating unit resulted in a write-down of €557 million (recoverable amount: €0.7 billion) Additions to provisions / reversals in the Hydro / Biomass / Gas segment, due to the deterioration of market conditions in the Netherlands. The impairment tests performed in the Coal / Nuclear segment in the previous year resulted in the recognition of impairments on property, plant and equipment in the amount of €791 million. This was mainly due to changed market conditions and specification of the lignite phaseout plans. Of these impairments, €579 million was related to the Garzweiler cash-generating unit (recoverable amount: €0.8 billion), €114 million to the Hambach cash-generating unit (recoverable amount: – €0.7 billion) and €98 million to the Inden cash-generating unit (recoverable amount: – €0.4 billion). Structural and adaptation measures Legal and other consulting and data processing services Disposal of current assets and decreases in values (excluding decreases in the value of inventories and marketable securities) Disposal of non-current assets including expenses from deconsolidation Insurance, commissions, freight and similar distribution costs General administration 538 419 57 322 18 37 83 49 Expenses from derivative financial instruments 1,125 Additionally, in the previous year impairments of €231 million were recognised on property, Expenses from leases Fees and membership dues Exchange rate losses Other taxes (primarily on property) Miscellaneous plant and equipment of the hard coal-fired power stations in the Coal / Nuclear segment (recoverable amount: €0.0 billion), in relation to the phaseout of hard coal in Germany. Other impairments on intangible assets and property, plant and equipment were recognised primarily on the basis of cost increases and changes in price expectations. Recoverable amounts are generally determined on the basis of fair values less costs to sell; in the 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 5.00 % (previous year: 2.75 % to 4.50 %). 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 determined fair values are assigned to Level 3 of the fair value hierarchy. 113 43 70 29 48 243 3,081 499 48 12 301 49 32 82 51 507 30 56 40 243 1,950 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information To improve the presentation of the development of business, in the year under review, (8) Financial result unrealised and realised losses from contracts measured at fair value in the Supply & Trading segment are stated as a net amount in expenses from derivative financial instruments. In the year under review, a net expense of €765 million was recognised. In the previous year, Financial result € million net income was recorded, which was reported in income from derivative financial instru- Interest and similar income ments under other operating income. (7) Income from investments Income from investments includes all income and expenses which have arisen in relation to operating investments. It is comprised of income from investments accounted for using the equity method and other income from investments. Other financial income Financial income Interest and similar expenses Interest accretion to Provisions for pensions and similar obligations (including capitalised surplus of plan assets) 2021 20201 Provisions for nuclear waste management as well as to mining provisions 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 Other provisions Other finance costs Finance costs 291 36 79 9 6 130 421 381 – 82 5 4 11 – 62 319 The financial result breaks down into net interest, interest accretion to provisions, other financial income and other finance costs. 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 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. Interest expenses incurred for lease liabilities amounted to €42 million in the year under review (previous year: €35 million). Net interest essentially includes interest income from interest- bearing securities and loans, income and expenses relating to marketable securities, and interest expenses. 114 2021 2020 260 1,550 1,810 340 21 135 – 19 1,346 1,823 – 13 283 1,650 1,933 296 37 203 15 1,836 2,387 – 454 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Interest income includes dividend income of €186 million from the 15% stake in E.ON Other financial income includes €60 million in gains realised from the disposal of marketa- (previous year: €182 million). ble securities (previous year: €28 million). Of the other finance costs, €41 million (previous year: €17 million) stem from realised losses on the disposal of marketable securities. In the year under review, €80 million in borrowing costs were capitalised as costs in connec- tion with the acquisition, construction or production of qualifying assets (previous year: (9) Taxes on income €61 million). The underlying capitalisation rate ranged from 3.6 % to 3.7 % (previous year: from 3.0 % to 3.7 %). Net interest € million Interest and similar income Interest and similar expenses Taxes on income € million 2021 2020 Current taxes on income Deferred taxes 260 340 – 80 283 296 – 13 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 2021 20201 – 150 840 690 – 46 422 376 Net interest stems from financial assets and liabilities, which were allocated to the following Of the deferred taxes, €931 million is related to temporary differences (previous year: measurement categories pursuant to IFRS 9: €425 million). In the year under review, changes in valuation allowances for deferred tax Interest result by category € million 2021 2020 Current taxes on income contain €419 million in net tax income (previous year: expenses Debt instruments measured at amortised cost 64 78 of €16 million) relating to prior periods. assets amounted to €701 million (previous year: €370 million). 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 10 186 – 340 – 80 3 Due to the utilisation of tax loss carryforwards unrecognised in prior years, current taxes on income were reduced by €8 million (previous year: €10 million). 14 Expenses from deferred taxes declined by €5 million (previous year: €7 million) due to 187 reassessments of and previously unrecognised tax loss carryforwards. – 295 – 13 115 RWE Annual Report 2021 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 2021 2020 Tax reconciliation 2021 20201 € 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. € million Income before tax Theoretical tax expense Differences to foreign tax rates Tax effects on Tax-free dividends Other tax-free income 11 – 9 107 – 40 69 15 1.035 – 105 945 Taxes in the amount of €186 million (previous year: €311 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 % 1,522 497 – 327 – 127 – 126 99 – 40 342 15 210 450 – 303 690 45.3 1,265 413 −105 −123 −31 29 −30 329 −1 86 −69 −122 376 29.7 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) 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. 116 RWE Annual Report 2021 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 assets1 € million Cost Balance at 1 Jan 2021 Additions / disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2021 Accumulated amortisation /  impairment losses Balance at 1 Jan 2021 Additions / disposals due to changes in the scope of consolidation Amortisation / impairment losses in the reporting period Transfers Currency translation adjustments Disposals Write-backs Balance at 31 Dec 2021 Carrying amounts Balance at 31 Dec 2021 Development costs Concessions, patent rights, licences and similar rights Customer relationships and similar assets Goodwill Prepayments Total 37 1 2 9 31 34 2 1 9 28 3 3,832 1,058 14 7 134 9 5,036 1,901 – 33 167 2 18 2 3 2,050 2,986 2,679 2 55 2,736 10 18 28 296 – 157 13 152 20 – 11 11 1 21 131 2,736 28 6,854 903 32 8 204 18 7,983 1,955 – 44 180 2 20 11 3 2,099 5,884 1 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 117 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Intangible assets1 € 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 3,713 230 19 6 – 98 38 3,832 1,799 4 138 2 – 6 36 1,901 1,931 2,549 184 – 46 8 2,679 6 4 10 310 – 1 – 13 296 6 – 1 16 – 1 20 276 2,679 10 6,618 413 23 5 – 158 47 6,854 1,841 3 156 – 8 37 1,955 4,899 1 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 118 RWE Annual Report 2021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 France SAS. In the previous year, goodwill declined by €8 million due to the deconsolidation amounted to €22 million (previous year: €20 million). of Georgia Biomass in the Hydro / Biomass / Gas cash-generating unit. Goodwill breaks down as follows: Goodwill € million Offshore Wind Onshore Wind / Solar Hydro / Biomass / Gas Supply & Trading 31 Dec 2021 31 Dec 20201 generating units. In the third quarter of every fiscal year, an impairment test is performed to determine if there is any need to write down goodwill. In doing so, goodwill is allocated to the cash- 1,441 184 105 1,006 2,736 1,376 The recoverable amount of the cash-generating unit is determined, which is defined as the 184 113 1,006 2,679 higher of fair value less costs to sell or value in use. Fair value is the best estimate of the price that an independent third party would pay to purchase the cash-generating unit as of the balance-sheet date. Value in use reflects the present value of the future cash flows which are expected to be generated with the cash-generating unit. 1 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which Fair value less costs to sell is assessed from an external perspective and value in use from a RWE acquired from Nordex in 2020 (see commentary on page 95). 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 medium- and In the previous year, new cash-generating units were formed as of 1 January 2020. In doing long-term business plans, as approved by the Executive Board and valid at the time of the so, goodwill in the amount of €606 was transferred from the former 'innogy – continuing impairment test. They pertain to a detailed planning period of three to ten years. The cash operations' cash-generating unit to the new Offshore Wind cash-generating unit and in the flow plans are based on experience as well as on expected market trends in the future. If amount of €121 million to the new Hydro / Biomass / Gas cash-generating unit. Goodwill of available, market transactions in the same sector or third-party valuations are taken as a €816 million was transferred from the former cash-generating unit 'operations acquired basis for determining fair value. Based on the use of internal planning assumptions, the from E.ON’ to the new Offshore Wind cash-generating unit. determined fair values are assigned to Level 3 of the fair value hierarchy. The impairment tests carried out in the previous year in relation to the formation of new The medium- and long-term business plans are based on country-specific assumptions cash-generating units did not result in any impairments. regarding the development of key economic indicators such as gross domestic product, consumer prices, interest rate levels and nominal wages. These estimates are, amongst In the previous year, goodwill increased by €184 million as a result of the first-time consoli- others, derived from macro- economic and financial studies. dation of Nordex's wind and solar projects in the Onshore Wind segment. This goodwill passed the impairment test in the fourth quarter of 2020. In the year under review, the Our key planning assumptions for the business segments active in electricity and gas goodwill of the cash-generating unit Offshore Wind increased by €9 million as a result of the initial consolidation of Baltic Trade and Invest Sp. z.o.o. In the Hydro / Biomass / Gas cash- generating unit, goodwill decreased by €8 million due to the deconsolidation of Energies markets relate to the development of wholesale prices of electricity, crude oil, natural gas, coal and CO2 emission allowances, market shares and regulatory framework conditions. 119 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information For the Renewables segments, the valuation is based on a normal wind year, which is calculated as the average of the last 20 years. The discount rates used for business valuations are determined on the basis of market data. During the period under review, they were 4.25 % for the cash-generating unit Supply & Trading (previous year: 4.25 %), 3.75 % for Offshore Wind (previous year: 4.25 %), 3.50 % for Onshore Wind / Solar (previous year: 3.50 %) and 4.00 % for Hydro / Biomass / Gas (previous year: 3.75 %). In the cash-generating units Offshore Wind and Onshore Wind / Solar, we used a growth rate of 0.50 % (previous year: 0.50 %) 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. The growth rate for each segment is generally derived from experience and expecta- tions of the future and does not exceed the long-term average growth rates of the respec- tive 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 Supply & Trading cash-generating unit exhibited the smallest surplus of recoverable amount over the carrying amounts. The recoverable amount was €0.7 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 1.25 percentage points to above 5.5 %, a growth rate reduced by more than 1.4 percentage points to less than – 1.4 % or cash flows reduced by more than €105 million in terminal value. 120 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (11) Property, plant and equipment Property, plant and equipment1 € million Cost Balance at 1 Jan 2021 Additions / disposals due to changes in the scope of consolidation Additions Transfers Currency translation adjustments Disposals Balance at 31 Dec 2021 Accumulated depreciation / impairment losses Balance at 1 Jan 2021 Additions / disposals due to changes in the scope of consolidation Amortisation / impairment losses in the reporting period2 Transfers Currency translation adjustments Disposals Write-backs Balance at 31 Dec 2021 Carrying amounts Balance at 31 Dec 2021 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 5,728 86 365 52 67 165 6,133 3,697 64 330 2 18 83 69 3,959 2,174 51,459 564 828 2,779 883 770 55,743 39,677 – 47 1,764 19 262 408 79 41,188 14,555 1,033 – 29 61 5 12 70 1,012 862 – 27 114 8 65 11 881 131 4,851 – 871 2,755 – 2,844 228 14 4,105 933 – 34 108 – 23 3 2 4 981 Total 63,071 – 250 4,009 – 8 1,190 1,019 66,993 45,169 – 44 2,316 – 2 291 558 163 47,009 1 Some prior-year figures restated due to retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) . 2 In part from the release of a provision for impending losses for purchase commitments. 121 3,124 19,984 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Property, plant and equipment1 € 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 Write-backs Balance at 31 Dec 2020 Carrying amounts Balance at 31 Dec 2020 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 5,323 87 443 23 – 58 90 5,728 3,128 102 511 – 13 22 9 3,697 2,031 48,758 2,068 872 1,290 – 808 721 51,459 35,505 2,761 2,266 24 – 262 563 54 39,677 11,782 988 15 69 7 – 10 36 1,033 770 17 115 – 6 34 862 171 4,224 – 236 2,389 – 1,326 – 185 15 4,851 873 88 – 24 – 1 3 933 1 Some prior-year figures restated due to retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) . 2 In part from the release of a provision for impending losses for purchase commitments. 122 Total 59,293 1,934 3,773 – 6 – 1,061 862 63,071 40,276 2,880 2,980 – 282 622 63 45,169 3,918 17,902 RWE Annual Report 2021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 €1,426 million (previous year: €1,590 million) In the previous year, RWE sold an office building to an external investor within the framework of was subject to restrictions from land charges, chattel mortgages or other restrictions. Disposals a sale-and-leaseback transaction. The fixed lease term of the leasing contract is 17.5 years. of property, plant and equipment resulted from sale or decommissioning. The following table shows the development of right-of-use assets recognised in property, Property, plant and equipment includes legally owned assets as well as right-of-use assets plant and equipment: from leases of which 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 2021 € million Cost Buildings Land Technical plant and machinery Pumped storage power stations Vehicle fleet Other plant, factory and office equipment Balance at 1 Jan 2021 Additions Depreciation, amortisation and impairments Disposals Other changes1 Balance at 31 Dec 2021 161 631 29 264 22 16 1,123 117 132 1 5 11 7 273 31 52 27 11 22 21 164 10 2 1 13 – 4 57 – 1 52 243 758 3 258 8 1 1,271 1 Other changes comprise transfers, write-backs, currency translation adjustments as well as additions and disposals in the scope of consolidation. 123 RWE Annual Report 2021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 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, write-backs, currency translation adjustments as well as additions and disposals in the scope of consolidation. 124 RWE Annual Report 2021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 In addition to right-of-use assets, property, plant and equipment also include land and Notes (8) Financial result, (23) Financial liabilities and (27) Reporting on financial instruments. buildings leased as operating leases by RWE as lessor. As of 31 December 2021, the carrying amount of these assets totalled €153 million (previous year: €180 million). In addition, leases had the following effect on the RWE Group’s earnings and cash flows in the year under review: The following payment claims resulted from these operating leases: 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 leases1 RWE as lessor Income from operating leases 1 Restated prior-year figure. 2021 2020 Nominal lease payments from operating leases € million 31 Dec 2021 31 Dec 2020 85 1 22 5 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 79 1 21 6 2 235 215 9 20 7 6 5 5 5 8 7 5 5 4 34 37 Leases primarily relating to wind farm sites that have been contractually agreed, but not begun yet, lead to future lease payments of €118 million (previous year: €187 million). Moreover, potential lease payments predominantly relating to leases of wind farm space were disregarded when valuing lease liabilities. This relates to €390 million (previous year: €405 million) in variable payments which may come due depending on generation volumes and €261 million (previous year: €97 million) in potential payments associated with extension and termination options. 125 RWE Annual Report 2021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 after taxes3 Other comprehensive income Total comprehensive income Dividends (prorated) RWE shareholding 1 Figures based on KEH's consolidated financial statements; KELAG is fully consolidated in these figures. 2 Figures based on proportional share of equity in KEH and KELAG. 3 Some prior-year figures restated. 126 Amprion GmbH, Dortmund KELAG-Kärntner Elektrizitäts-AG /  Kärntner Energieholding Beteiligungs GmbH (KEH), Klagenfurt (Austria) 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 6,676 4,982 2,657 5,681 833 5,953 2,838 2,001 3,488 829 833 829 1,826 1,780 346 950 253 436 198 634 349 946 266 393 198 591 9,000 12,622 1,061 1,300 137 – 20 117 25 25 % 495 – 35 460 25 25 % 110 – 6 104 19 49 % 112 – 47 65 19 49 % RWE Annual Report 2021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 KELAG-Kärntner Elektrizitäts-AG, headquartered in Klagenfurt, Austria, is a leading for the electricity sector, pursuant to the German Energy Act. Amprion’s main shareholder is Austrian energy supplier in the fields of electricity, district heating and natural gas. RWE has a consortium of financial investors. an interest of 49 % in Kärntner Energieholding Beteiligungs GmbH (KEH), KELAG’s largest shareholder and also holds 12.85 % of KELAG directly (imputed RWE shareholding of 37.9 %). 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 2021 31 Dec 20201 31 Dec 2021 31 Dec 20201 27 1 28 367 24 -28 -4 213 160 13 173 1,187 187 -2 185 1,642 1 Some prior-year figures restated due to retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 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 conditions in loan agreements. 127 RWE Annual Report 2021 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 2021 31 Dec 2020 Non-current securities amounting to €146 million and €3 million (previous year: €133 million, adjusted by €104 million, and €4 million) were deposited in trust for RWE AG and its subsidiaries, in order to cover credit balances stemming from the block model for pre- retirement part-time work, pursuant to Sec. 8a of the Pre-Retirement Part-Time Work Act and from the management of long-term working hours accounts pursuant to Sec. 7e of the German Code of Social Law IV, respectively. This coverage applies to the employees of RWE AG as well as to the employees of Group companies. € million Derivatives Capitalised surplus of plan assets over benefit obligations Prepayments for items other than inventories CO emission allowances 2 (14) Financial receivables Miscellaneous other assets Non- current Current Non- current Current 668 64,492 675 8,109 459 172 167 793 2,363 1,353 3,490 66,805 64,584 2,587 3,434 855 2,221 2,579 148 446 1,118 9,821 8,452 1,369 Financial receivables 31 Dec 2021 31 Dec 2020 of which: financial assets € million Non- current Current Non- current Current of which: non-financial assets 1,134 2,356 Loans to non-consolidated subsidiaries and investments 101 1 105 Collaterals for trading activities Other financial receivables Accrued interest Miscellaneous other financial receivables 11,997 64 332 12,394 10 111 26 131 1 2,154 43 284 2,482 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. The increase in derivatives during the reporting period resulted from the significant price rises for over-the-counter commodity derivatives for electricity and natural gas, which cannot be netted. Companies of the RWE Group deposited collateral for the trading activities stated above for our early exit from the lignite business awarded by the German government (previous year: exchange- based and over-the-counter transactions. These are to guarantee that the €2,600 million). The EU Commission is expected to grant approval in 2022, as part of the obligations from the trans actions are discharged even if the development of prices is not review of compliance with state aid law. €2,600 million of the miscellaneous other assets comprise the compensatory payments for favourable for RWE. Regular 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. 128 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Furthermore, in the previous year €86 million of the miscellaneous other assets were Deferred taxes 31 Dec 2021 31 Dec 20201 allocable to government grants awarded in relation with co-firing biomass in two Dutch power plants. (16) Deferred taxes Deferred tax assets and liabilities principally stem from the fact that measurements in the IFRS statements differ from those in the tax bases. As of 31 December 2021, no deferred € million Non-current assets Current assets Exceptional tax items Non-current liabilities tax liabilities were recognised for the difference between net assets and the carrying value Provisions for pensions of the subsidiaries and associates for tax purposes (known as ‘outside basis differences’) in the amount of €817 million (previous year: €820 million), as it is neither probable that there will be any distributions in the foreseeable future, nor will the temporary differences reduce in Other non-current liabilities Current liabilities the foreseeable future. €36,348 million and €35,531 million of the gross deferred tax assets and liabilities, respectively, will be realised within twelve months (previous year: €3,404 milli- Tax loss carryforwards on and €4,047 million). The following is a breakdown of deferred tax assets and liabilities by item: Corporate income tax (or comparable foreign income tax) Trade tax (or comparable foreign local income tax) 146 1 Assets Liabilities Assets Liabilities 487 2,055 663 9,875 26,245 1,373 126 26 900 15 356 26,473 9,286 37,206 38,638 1,367 2,526 58 3 848 1,521 6,323 85 645 2,031 4,797 49 12 Gross total Netting Net total 37,353 38,638 4,858 6,323 – 36,690 – 36,690 – 4,461 – 4,461 663 1,948 397 1,862 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.) and retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). As of 31 December 2021, RWE reported deferred tax claims which exceeded the deferred tax liabilities by €48 million (previous year: €73 million), in relation to companies which suffered a loss in the current or previous period. The basis for the recognition of deferred tax assets is the judgement of the management that it is likely that the companies in question will generate taxable earnings, against which unutilised tax losses and deductible temporary differences can be applied. 129 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The capitalised tax reduction claims from loss carryforwards result from the expected The carrying amount of inventories acquired for resale purposes was €2,340 million utilisation of previously unused tax loss carryforwards in subsequent years. (previous year: €964 million). As in the previous year, this entire amount related to gas inventories in the reporting period. It is sufficiently certain that these tax carryforwards will be realised. At the end of the reporting period, corporate income tax loss carryforwards and trade tax loss carryforwards The fair value of gas inventories is determined every month on the basis of the current price (or such related to comparable foreign income tax) for which no deferred tax claims have curves of the relevant indices for gas (e. g. NCG). The valuations are based on prices which been recognised amounted to €4,187 million and €2,965 million, respectively (previous can be observed directly or indirectly (Level 2 of the fair value hierarchy). Differences year: €2,811 million and 1,912 million). 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. The corporate income tax loss carryforwards do not have any time limits, but are not expected to be used for the most part. (18) Marketable securities As of 31 December 2021, temporary differences for which no deferred tax assets were €8,036 million (previous year: €4,216 million) which predominantly have a maturity of recognised amounted to €14,678 million (previous year: €13,216 million). more than three months from the date of acquisition. Stocks and profit-participation certificates accounted for €4 million (previous year: €3 million). Marketable securities Current marketable securities include fixed-interest marketable securities totalling In the year under review, a deferred tax expense of –€68 million arising from the currency are stated at fair value. translation of foreign financial statements was offset against equity (previous year: deferred tax income of €41 million). (19) Cash and cash equivalents (17) Inventories Inventories € million Raw materials, incl. nuclear fuel assemblies and earth excavated for lignite mining Work in progress – goods / services Finished goods and goods for resale Prepayments 436 31 2,368 – 7 579 50 999 4 31 Dec 2021 31 Dec 2020 Cash and demand deposits Cash and cash equivalents € million Marketable securities and other cash investments (maturity less than 3 months from the date of acquisition) 31 Dec 2021 31 Dec 2020 5,824 4,764 1 10 5,825 4,774 RWE keeps demand deposits exclusively for short-term cash positions. For cash investments, 2,828 1,632 banks are selected on the basis of various creditworthiness criteria, including their rating from one of the three renowned rating agencies – Moody’s, Standard & Poor’s and Fitch – as well as their equity capital and prices for credit default swaps. As in the previous year, interest rates on cash and cash equivalents were at market levels in 2021. 130 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information (20) Equity On 28 April 2021, the General Meeting also decided on a conditional increase of the A breakdown of fully paid-up equity is shown on page 92. The subscribed capital of RWE AG company’s capital stock by up to €173,112,330.24, divided into up to 67,622,004 bearer consists exclusively of common no-par-value bearer shares. shares. This conditional capital increase serves the purpose of granting shares to the Subscribed capital 31 Dec 2021 Number of shares 31 Dec 2020 Number of shares 31 Dec 2021 Carrying amount 31 Dec 2020 Carrying amount holders or creditors of convertible and / or option bonds. It shall only be implemented by 27 April 2026 to the extent that the holders or creditors of convertible and / or option bonds issued on the basis of the resolution passed by the Annual General Meeting on 28 Ap- ril 2021 by the company or a company affiliated with the company within the meaning of Shares 676,220 676,220 1,731 1,731 direct or indirect stake of at least 90 %, exercise conversion / option rights, fulfil conversion / in '000. in '000. € million € million Sections 15 et seqq. of the German Stock Corporation Act, in which the company has a option obligations, or shares are tendered and no other forms of fulfilment are used. The Executive Board is authorised, subject to Supervisory Board approval, to determine further On 18 August 2020, RWE AG decided on a capital increase in return for cash contributions details of implementing conditional capital increases. with partial utilisation of the approved capital authorised by the General Meeting on 26 April 2018. The company's capital stock was thus increased by 10 % via the issue of Pursuant to a resolution passed by the Annual General Meeting on 26 April 2018, the 61,474,549 new bearer shares, under the exclusion of existing shareholders’ subscription company was further authorised until 25 April 2023 to acquire shares of the company up to rights. The new shares were placed with institutional investors at a price of €32.55 per share a volume of 10 % of the capital stock when the resolution on this authorisation was passed, in an accelerated bookbuilding process. As a result of the capital increase, in the previous or if the following is lower, when this authorisation is exercised. Based on the authorisation, year the subscribed capital of RWE AG rose by €157,374,845.44 and its paid-in capital the Executive Board is authorised to cancel treasury shares without a further resolution by rose to €1,843,621,724.51. Transaction expenses of €11,070,500.71 were offset against the Annual General Meeting. Moreover, the Executive Board is authorised to transfer or sell retained earnings in the previous year. such shares to third parties under certain conditions and excluding shareholders’ subscrip- tion rights. Furthermore, treasury shares may be issued to holders of option or convertible As the approved capital was partially utilised in this capital increase, the General Meeting bonds under certain conditions. The Executive Board is also authorised to use the treasury passed a resolution to replace the remaining authorisation with new approved capital on shares to discharge obligations from future employee share schemes; in this regard, 28 April 2021. Pursuant to this resolution, the Executive Board is authorised, subject shareholders’ subscription rights shall be excluded. to Supervisory Board approval, to increase the company’s capital stock by up to €346,224,663.04 – equivalent to approximately 20 % of the current capital stock – No treasury shares were held as of 31 December 2021, as was also the case at last year's until 27 April 2026 through the issue of up to 135,244,009 bearer shares in return for reporting date. contributions in cash and/or in kind (approved capital). In certain cases, with the approval of the Supervisory Board, the subscription rights of for a purchase price of €9,459,816.32 on the capital market (previous year: In fiscal 2021, RWE AG purchased a total of 288,624 RWE shares (previous year: 314,808) shareholders can be excluded. €10,633,444.15). This is equivalent to €738,877.44 of the capital stock (0.04 % of subscribed capital) (previous year: €805,908.48 and 0.05 % of subscribed capital). Employees of RWE AG and its subsidiaries received a total of 288,624 shares for capital 131 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information formation under the employee share plan (previous year: 314,808). This resulted in total Dividend proposal proceeds of €9,356,616.42 (previous year: €10,516,392.73). The difference to the We propose to the Annual General Meeting that RWE AG’s distributable profit for fiscal purchase price was offset against freely available retained earnings. 2021 be appropriated as follows: As a result of equity capital transactions with subsidiary companies which did not lead to a Distribution of a dividend of €0.90 per share. change of control, the share of equity attributable to RWE AG’s shareholders changed by a total of – €10 million (previous year: – €145 million) and the share of equity attributable to Dividend other shareholders changed by a total of €6 million (previous year: €395 million). In the previous year, this included the subsequent effects of the 2019 acquisition of the 23.2 % Profit carryforward Distributable profit non-controlling interest in the continuing innogy operations (change in RWE AG shareholders' interest in Group equity of – €298 million) as well as effects from the sale of a 49 % stake in €608,598,043.20 €25,045.09 €608,623,088.29 the offshore UK wind farm Humber Gateway (€163 million change in the share of equity Based on a resolution of RWE AG’s Annual General Meeting on 28 April 2021, the dividend for attributable to RWE AG’s shareholders). fiscal 2020 amounted to €0.85 per dividend-bearing share. The dividend payment to shareholders of RWE AG amounted to €575 million (previous year: €492 million). Accumulated other comprehensive income (OCI) reflects changes in the fair values of debt instruments measured at fair value through other comprehensive income, cash flow hedges and hedges of the net investment in foreign operations, as well as changes stem- ming from foreign currency translation adjustments from foreign financial statements. As of 31 December 2021, the share of accumulated other comprehensive income attribu- table to investments accounted for using the equity method amounted to – €11 million (previous year: – €29 million). During the reporting year, €7 million in differences from currency translation which had originally been recognised without an effect on income were realised as income (previous year: income of €3 million). 132 RWE Annual Report 2021 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- The share ownership of third parties in Group entities is presented in this item. controlling interests: Non-controlling interests in OCI € million Currency translation adjustment Fair valuation of financial instruments used for hedging purposes Income and expenses recognised directly in equity, to be reclassified through profit or loss in the future 2021 2020 64 36 100 100 – 25 – 17 – 42 – 42 133 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Material non-controlling interests are attributable to the subsidiary Rampion Offshore Wind (21) Share-based payment Limited., headquartered in Coventry, United Kingdom. For executives of RWE AG as well as of affiliated companies, Long Term Incentive Plans Subsidiaries with material non-controlling interests € million Balance sheet Non-current assets Current assets Non-current liabilities Statement of comprehensive income Revenue Income Total comprehensive income Cash flows from operating activities Non-controlling interests Dividends paid to non-controlling interests Income of non-controlling interests Share of non-controlling interests in equity Share of non-controlling interests in voting rights Rampion Offshore Wind Limited, United Kingdom 31 Dec 2021 1,929 169 250 278 85 123 183 68 42 49.90 % 49.90 % (LTIPs) are in place as share-based payment systems known as Strategic Performance Plans (SPPs). The expenses associated with these are borne by the Group companies which employ the persons holding notional stocks. The LTIP SPP 2016-2020 was introduced in 2016. It uses an internal performance target (net income of relevance to remuneration) derived from the mid-term planning and takes into account the development of RWE AG‘s share price. Executives receive conditionally granted virtual shares (performance shares). The final number of virtual shares in a tranche is determined based on the achievement of the adjusted net income target. Each of the issued LTIP SPP tranches has a term of four years before payment is possible. The plan conditions of the LTIP SPP were adjusted and extended for grants starting from fiscal 2021. In the future, along with the development of adjusted net income of relevance to remuneration, the share-based payment scheme LTIP SPP 2021 will orientate to two additional success factors: the 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 stocks. These three success factors determine how many of the conditionally granted performance shares are finally granted at the end of the performance period. The performance period was extended from the previous one year to three years. Once it ends, all three success factors 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. Rampion Offshore Wind Limited, United Kingdom, was fully consolidated for the first time in the second quarter of 2021. 134 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information LTIP SPP 2016-2020 2017 tranche Start of term 1 Jan 2017 Number of conditionally granted performance shares 1,338,027 Term (vesting period) 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 Cap / number of performance shares Cap / payment amount Determination of payment 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 by holding at least 30 % of the voting rights including third-party voting rights attributable to it in accordance with Sec. 30 of the German Securities Acquisition and Takeover Act, or b) a control agreement in accordance with Sec. 291 of the German Stock Corporation Act 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, 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 Payment date 2021 2022 2023 2024 135 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information LTIP SPP 2021 Start of term Number of conditionally granted performance shares Term (vesting period) Performance targets Weighting of performance targets 2021 tranche 1 Jan 2021 823,566 4 years 1. Adjusted net income; 2. CO2 intensity; 3. Relative total shareholder return Average achievement of performance targets, each weighted 1/3 Performance period 3 years Cap / number of performance shares Cap / payment amount Determination of payment 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 by holding at least 30 % of the voting rights including third-party voting rights attributable to it in accordance with Sec. 30 of the German Securities Acquisition and Takeover Act, or b) a control agreement in accordance with Sec. 291 of the German Stock Corporation Act 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, 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 without change on expiry of the holding period. The payment amount is determined according to the exercise conditions, with the deviation that the takeover price per share is to be used, plus the dividends paid per share in the fiscal years between the start of the vesting period and the time of the change in control. The value of all performance shares granted conditionally at the time of the change of control shall be determined with appropriate application of the exercise conditions based on the full-year results for the targets that are available up to the fiscal year in which the change of control occurs, even if in this case the performance period only lasts one or two years. The payment amount is determined according to the exercise conditions, with the deviation that the takeover price per share is to be used, plus the dividends paid per share in the fiscal years between the start of the vesting period and the time of the change in control. All conditionally granted performance shares for the calendar year of the change of control shall lapse without consideration. Form of settlement Cash settlement Payment date 2025 RWE Annual Report 2021 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 The performance shares displayed the following development in the fiscal year that just following sums on the grant date: came to a close: Performance Shares from the RWE AG SPP € 2017 tranche 2018 tranche 2019 tranche 2020 tranche 2021 tranche Performance Shares from the RWE AG SPP 2017 tranche 2018 tranche 2019 tranche 2020 tranche 2021 tranche Fair value per share 11.62 18.80 19.10 26.41 34.07 Outstanding at the start of the fiscal year 1,643,631 1,088,490 1,403,532 935,331 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 corresponding 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 determining the option price. Multivariate Monte Carlo simulations were used for the valuation of RWE AG’s 2021 tranche of the SPP. In this context, the success factors not dependent on the capital market were Granted Change1 Paid out Outstanding at the end of the fiscal year Payable at the end of the fiscal year -1,643,631 -10,609 -7,973 77,820 823,566 1,077,881 1,395,559 1,013,151 823,566 1,077,881 1 'Change' pertains to the final grant based on target achievement or the subsequent grant or lapse of performance shares. taken as the best estimators without variability. In the valuation model, due consideration For the SPP options exercised in the previous fiscal year, the average weighted daily share was given to the maximum payment amounts stipulated in the programme’s conditions for price on the day of exercise was €34.51. each conditionally granted SPP (= option strike), the success factors not dependent on the capital market, the current level of the RWE AG share and the index, the volatilities and During the period under review, expenses for the share-based payment system totalled correlations, the discount rates for the remaining term and the expected dividends of RWE AG. €33 million (previous year: €38 million). As of the balance-sheet date, provisions for cash-settled share- based payment programmes amounted to €85 million (previous year: €85 million). 137 RWE Annual Report 2021 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 CO emission allowances / certificates for renewable energies 2 Miscellaneous other provisions 138 31 Dec 2021 31 Dec 2020 Non- current Current Total Non- current Current 1,934 5,577 4,871 12,382 304 579 1,266 1,196 553 73 223 367 4,561 16,943 452 122 574 832 31 213 2 94 1 2,099 422 3,694 4,268 1,934 6,029 4,993 3,864 6,113 4,729 12,956 14,706 1,136 610 1,479 1,198 647 74 223 2,099 789 8,255 339 624 1,366 1,125 648 76 223 363 4,764 21,211 19,470 338 85 423 651 18 124 11 70 2 1,332 373 2,581 3,004 Total 3,864 6,451 4,814 15,129 990 642 1,490 1,136 718 78 223 1,332 736 7,345 22,474 RWE Annual Report 2021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 scope of the Act on the Supervision of Insurance Undertakings and oversight by the defined contribution and defined benefit plans. The defined benefit commitments mainly Federal Financial Supervisory Agency (BaFin). Insofar as a regulatory deficit occurs in the relate to pension benefits based on final salary. These are exposed to the typical risks of pension fund, supplementary payment shall be requested from the employer. Independently longevity, inflation and salary increases. of the aforementioned rules, the liability of the employer shall remain in place. The boards of RWE Pensionstreuhand e.V. and RWE Pensionsfonds AG are responsible for ensuring that In the reporting period, €36 million (previous year: €32 million) was paid into defined the funds under management are used in compliance with the contract and thus fulfil the contribution plans. This includes payments made by RWE for a benefit plan in the Nether- requirements for recognition as plan assets. In March 2021, RWE made an extraordinary lands which covers the commitments of various employers. This fund does not provide the funding payment of €1,049 million to the assets held in trust, in order to further improve the participating companies with information allowing for the pro-rata allocation of defined capital coverage of the domestic pension obligations. benefit obligations, plan assets and service cost. In the consolidated financial statements, the contributions are thus recognised analogously to a defined contribution plan, although In the United Kingdom, it is legally mandated that defined benefit plans are provided with this is a defined benefit plan. The pension plan for employees in the Netherlands is adminis- adequate and suitable assets to cover pension obligations. The corporate pension system is tered by Stichting Pensioenfonds ABP (see www.abp.nl). Contributions to the pension plan managed by the sector-wide Electricity Supply Pension Scheme (ESPS). Following completi- are calculated as a percentage rate of employees’ salaries and are paid by the employees on of the E.ON transaction, dedicated independent sections were formed for RWE for the and employers. The rate of the contributions is determined by ABP. There are no minimum conventional generation business (RWE Section), for the renewables business acquired funding obligations. Approximately €9 million in employer contributions are expected to be legally from innogy which has been consolidated with RWE without interruption (Innogy paid to the ABP pension fund in the following fiscal 2022 (prior-year figure for fiscal 2021: Section) and for the renewables business acquired from E.ON (Former E.ON Section). The €9 million). The contributions are used for all of the beneficiaries. If ABP’s funds are sections are managed by trustees which are elected by members of the pension plans or insufficient, it can either curtail pension benefits and future post-employment benefits, or appointed by the sponsoring employers. The trustees are responsible for managing the increase the contributions of the employer and employees. In the event that RWE termina- pension plans. This includes investments, pension payments and financing plans. The tes the ABP pension plan, ABP will charge a termination fee. Amongst other things, its level pension plans comprise the benefit obligations and plan assets for the subsidiaries of the depends on the number of participants in the plan, the amount of salary and the age RWE Group. It is required by law to assess the required financing of the pension plans once structure of the participants. As of 31 December 2021, we had around 600 active every three years in compliance with the UK regulations for pensions (a so-called funding participants in the plan (previous year: approximately 600). valuation). This involves measuring pension obligations on the basis of conservative assumptions, which deviate from the requirements imposed by IFRS. The underlying RWE transferred assets to RWE Pensionstreuhand e.V. within the framework of a contrac- actuarial assumptions primarily include the projected life expectancies of the members of the tual trust arrangement (CTA) in order to finance the pension commitments of German pension plans as well as assumptions relating to inflation, imputed interest rates and the Group companies. There is no obligation to provide further funds. From the assets held in market returns on the plan assets. trust, funds were transferred to RWE Pensionsfonds AG to cover pension commitments to most of the employees who have already retired. RWE Pensionsfonds AG falls under the 139 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The last funding valuation for the RWE section was carried out on 31 March 2019 and It revealed a financing deficit of £7 million. In December 2021, the sponsoring employers showed that the RWE section had a financing deficit of £44.3 million, which was rectified with and the trustees decided to transfer the members of this section to the Innogy Section. a payment of £48.3 million as of 31 March 2020. The next funding valuation must occur by Consequently, there is no need to settle the financing deficit. 31 March 2022. A financing deficit of £103.4 million was revealed for the Innogy Section. It was subsequently agreed with the trustees to rectify this deficit with annual payments of The payments to settle the deficit are charged to the participating companies on the basis of £37.5 million, £36.3 million, £17.0 million and £17.0 million from 2020 to 2023. An a contractual agreement. Above and beyond this, payments are regularly made to finance the agreement was also reached with the trustees to draw forward the next valuation to newly arising benefit obligations of active employees which increase the pension claims. 31 March 2021. This valuation was completed in December 2021. No financing deficit was identified. Together with the trustees, the decision was then made not to undertake the Provisions for defined benefit plans are determined using actuarial methods. We apply the annual payments for 2022 and 2023 resulting from the previous valuation. A valuation was following assumptions: carried out for the section of the renewables business acquired from E.ON on 31 March 2020. 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 2021 31 Dec 2020 Germany Foreign1 Germany 1.10 2.35 1.80 3.20 0.80 2.35 Foreign1 1.30 3.00 1.00, 1.60 and 1.75 2.20 and 3.10 1.00, 1.60 and 1.75 2.10 and 2.90 140 RWE Annual Report 2021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 2021 31 Dec 2020 € million Germany1 Equity instruments, exchange-traded funds Interest-bearing instruments Real estate Mixed funds3 Alternative investments Other4 1,784 5,430 1 663 60 7,938 Of which: Level 1 pursuant to IFRS 13 1,754 609 24 2,387 Of which: Level 1 pursuant to IFRS 13 108 419 143 101 771 Foreign2 496 4,146 1,478 386 626 7,132 Of which: Level 1 pursuant to IFRS 13 1,449 324 542 23 Germany1 1,472 3,785 1 645 711 56 6,670 2,338 Of which: Level 1 pursuant to IFRS 13 69 116 85 270 Foreign2 485 3,956 1,509 412 477 6,839 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 achieve consistently high returns, there is also investment in products which are more likely pension commitments and the relation of these two items to each other, in order to determine to offer relatively regular positive returns over time. This involves products with returns the best possible investment strategy (Asset Liability Management Study). Using an optimi- which fluctuate like those of bond investments, but which achieve an additional return over sation process, portfolios are identified which can earn the best targeted results at a the medium term, such as so-called absolute return products. defined level of risk. One of these efficient 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 The focus of RWE’s strategic investment policy is on domestic and foreign government context is to maintain the level of pension plan funding and ensure the full financing of the bonds. In order to increase the average yield, corporate bonds with a higher yield are also pension plans over time. To reduce financing costs and earn surplus returns, we also include included in the portfolio. The ratio of equities in the portfolio is lower than that of bonds. higher-risk investments in our portfolio. The capital investment focusses on government and obligations as well as liquidity and risk matters. The goal of the investment strategy in this Investment occurs in various regions. The investment position in equities is intended to corporate bonds. earn a risk premium over bond investments over the long term. Furthermore, in order to 141 RWE Annual Report 2021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 2021 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 2021 of which: domestic of which: foreign Present value of pension commitments Fair value of plan assets Capitalised surplus of plan assets 17,201 13,509 172 171 170 35 – 782 – 4 458 8 – 727 7 8 16,545 9,844 6,701 149 503 474 8 1,129 – 702 5 – 5 15,070 7,938 7,132 18 269 459 3 456 Total 3,864 171 21 – 503 35 – 782 – 4 2 – 1,129 – 25 2 8 5 269 1,934 1,909 25 1 Of which: €1,092 million from initial and subsequent transfers to plan assets and €37 million in cash flows from operating activities. 2 Contained in cash flows from operating activities. 142 RWE Annual Report 2021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 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 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 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. 143 RWE Annual Report 2021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 2021 31 Dec 2020 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 – 792 – 486 – 63 – 41 – 518 – 339 813 518 46 42 507 267 478 223 903 552 65 47 569 382 523 210 – 715 – 458 – 44 – 36 – 463 – 307 144 RWE Annual Report 2021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 Domestic company pensions are subject to an obligation to review for adjustment every assumptions remaining unchanged. Actual developments will probably be different than three years pursuant to the Act on the Improvement of Company Pensions (Sec 16 of the this. The methods of calculating the aforementioned sensitivities and for calculating the German Company Pension Act (BetrAVG)). Additionally, some commitments grant annual pension provisions are in agreement. The dependence of pension provisions on market adjustments of pensions, which may exceed the adjustments in compliance with the legally interest rates is limited by an opposite effect. The background of this is that the commit- mandated adjustment obligation. ments stemming from company pension plans are primarily covered by funds, and mostly plan assets exhibit negative correlation with the market yields of fixed- interest securities. Some domestic pension plans guarantee a certain pension level, taking into account the Consequently, declines in market interest rates are typically reflected in an increase in plan statutory pension (total retirement earnings schemes). As a result, future reductions in the assets, whereas rising market interest rates are typically reflected in a reduction in plan assets. statutory pension can result in higher pension payments by RWE. The present value of pension obligations, less the fair value of the plan assets, equals the net The weighted average duration of the pension obligations was 16 years in Germany amount of funded and unfunded pension obligations. (previous year: 16 years) and 16 years outside of Germany (previous year: 17 years). As of the balance-sheet date, the recognised amount of pension provisions totalled In fiscal 2022, RWE expects to make €65 million in payments for defined benefit plans of €1,367 million for funded pension plans (previous year: €3,265 million) and €567 million continuing operations (previous-year target: €240 million), as direct benefits and contribu- for unfunded pension plans (previous year: €599 million). tions to plan assets. As in the previous year, a 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 2021 Additions Unused amounts released Interest accretion Amounts used 6,451 4,814 11,265 162 116 278 – 2 – 2 – 4 14 127 141 – 596 – 62 – 658 Balance at 31 Dec 2021 6,029 4,993 11,022 145 RWE Annual Report 2021 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 missioning and dismantling work can be performed in time after the expiry of the operating nuclear power plants Biblis A and B, Emsland and Gundremmingen A, B and C, as well as permit. Dismantling operations essentially consist of dismantling and removal of the Lingen and Mülheim-Kärlich. Provisions for waste disposal for the Dutch nuclear power plant radioactive contamination from the facilities and structures, radiation protection, and Borssele are included at a rate of 30 %, in line with RWE’s stake. regulatory monitoring of the dismantling measures and residual operations. Provisions for nuclear waste disposal are almost exclusively reported as non-current We thus subdivide our provisions for nuclear waste management into the residual operation provisions, and their settlement amount is discounted to the balance-sheet date. Based on of nuclear power plants, the dismantling of nuclear power station facilities as well as the the current state of planning, these provisions will essentially be used by the beginning of cost of residual material processing and radioactive waste treatment facilities. the 2040s. The discount rate calculated on the basis of the current level of market interest rates for no-risk cash investments was 0.0 % as of the balance-sheet date (previous year: 0.0 %). The escalation rate based on expectations with regard to general increases in wages and Provisions for nuclear waste management € million 31 Dec 2021 31 Dec 2020 prices and productivity growth was 1.5 % (previous year: 1.5 %). As a result, the real discount Residual operation rate used for nuclear waste management purposes, which is the difference between the Dismantling discount rate and the escalation rate, amounted to – 1.5 % (previous year: – 1.5 %). An increase (decrease) in this rate by 0.1 percentage point would reduce (increase) the present Processing of residual material and waste management value of the provision by roughly €40 million. 2,211 2,126 1,692 6,029 2,707 2,007 1,737 6,451 Excluding the interest accretion, additions to provisions for nuclear waste management are Provisions for the residual operation of nuclear power station facilities cover all steps that based on quantity-related increases in the provisions as well as updates of the cost estima- must be taken largely independent of dismantling and disposal but are necessary to ensure tes and amount to €162 million. Of the changes in provisions, €21 million was offset that the assets are safe and in compliance with permits or are required by the authorities. against the corresponding costs of nuclear power plants still in operation and the fuel In addition to works monitoring and facility protection, these mainly include service, recurrent elements. In the reporting period, we also used provisions of €245 million for the decom- audits, maintenance, radiation and fire protection as well as infrastructural adjustments. missioning of nuclear power plants. Decommissioning and dismantling costs had originally been capitalised in a corresponding amount and reported under the cost of the respective Provisions for the dismantling of nuclear power plant facilities include all work done to nuclear power plants. dismantle plants, parts of plants, systems and components as well as on buildings that must be dismantled to comply with the Nuclear Energy Act. They also consider the conventio- The provisions of the law on the reassignment of responsibility for nuclear waste disposal nal dismantling of nuclear power plant facilities to fulfil legal or other obligations. stipulate that accountability for the shutdown and dismantling of the assets in Germany as well as for packaging radio active waste remains with the companies. The shutdown and Provisions for residual material processing and waste management include the costs of dismantling process encompasses all activities following the final termination of production processing radioactive residual material for non-hazardous recycling and the costs of by the nuclear power plant until the plant site is removed from the regulatory scope of the treating radioactive waste produced during the plant’s service life and dismantling Nuclear Energy Act. A request to decommission and dismantle the nuclear power plant will operations. This includes the various processes for conditioning, proper packaging of the be filed with the nuclear licensing authority during its operating period so that the decom- low-level and intermediate-level radioactive waste in suitable containers and the transportati- 146 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information on of such waste to BGZ Gesellschaft für Zwischenlagerung mbH (BGZ), which has been In terms of their contractual definition, provisions for nuclear waste management break commissioned by the Federal government for intermediate storage. This item also contains down as follows: 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. Provisions for nuclear waste management € million Provisions for nuclear obligations, not yet contractually defined Commissioned by the plant operator, the internationally renowned company NIS Ingenieur- Provisions for nuclear obligations, contractually defined gesellschaft mbH, Alzenau, assesses the prospective costs of residual operation and dismantling of the nuclear power plants on an annual basis. The costs are determined specifically for each facility and take into consideration the current state of the art, 31 Dec 2021 31 Dec 2020 4,148 1,881 6,029 4,623 1,828 6,451 regulatory requirements and previous practical experience from ongoing and completed The provision for obligations which are not yet contractually defined covers the costs of the dismantling projects. Additionally, current developments are also incorporated into the cost remaining operational phase of the operating plants, the costs of dismantling as well as the calculations. They also include the cost of conditioning and packaging radioactive waste residual material processing and waste treatment costs incurred in connection with waste generated during dismantling operations and the transportation of such waste to BGZ. produced as a result of shutdowns. Further cost estimates for the disposal of radioactive waste are based on contracts with foreign reprocessing companies and other disposal companies. Furthermore, the cost Provisions for contractually defined nuclear obligations relate to all obligations the value estimates are based on plans by internal and external experts, in particular GNS Gesell- of which is specified in contracts under civil law. The obligations include the anticipated schaft für Nuklear-Service mbH, (GNS) Essen. residual costs of reprocessing 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 radioacti- ve 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. The cost estimates are based on internal planning and estimates and are largely backed by external expert opinions. 147 RWE Annual Report 2021 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 the real discount rate would increase the present value of the provision by around €140 mil- towards the current market interest rates for risk-free cash investments. Since no market lion, while an increase of 0.1 percentage point would reduce the present value by around interest rates are available for later periods, a sustainable, long-term interest rate is used to €130 million. discount the amounts used after the next 30 years. The average discount rate was 2.1 % (previous year: 2.0 %). The majority of the provisions still pertains to claims that are expected Excluding the interest accretion, additions to provisions for mining damage amounted to to materialise over the next 30 years. Based on the currently expected price and cost €116 million in the reporting period. The reason for this was quantity-induced increases in increases, the escalation rate was 1.5 % as in the previous year. The real discount rate the obligatory volume and updates of the cost estimates, of which €21 million was capitalised applied for mining purposes, which is the difference between the discount rate and the in the item The interest accretion increased provisions for mining damage by €127 million, of escalation rate, was thus 0.6 % (previous year: 0.5 %). A decline of 0.1 percentage point in which €6 million was capitalised in the item 'property, plant and equipment'. 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 CO certificates for renewable energies 2 emission allowances /  Miscellaneous other provisions Balance at 1 Jan 2021 Additions Unused amounts released Interest accretion Changes in the scope of consoli dation, currency adjustments, transfers Amounts used Balance at 31 Dec 2021 990 642 1,490 1,136 718 78 223 1,332 736 7,345 708 96 425 159 35 1 2,095 435 3,954 – 25 – 64 – 77 – 165 – 92 – 4 – 27 – 41 – 495 – 15 – 9 – 105 – 9 – 138 37 – 40 175 8 3 20 – 17 186 – 574 – 9 – 350 – 2 – 13 – 4 – 1,321 – 324 – 2,597 1,136 610 1,479 1,198 647 74 223 2,099 789 8,255 148 RWE Annual Report 2021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 (23) Financial liabilities part-time work arrangements, severance, outstanding vacation and service jubilees and performance-based pay components. Based on current estimates, we expect most of these Financial liabilities 31 Dec 2021 31 Dec 2020 to be used from 2022 to 2025. Provisions for restructuring obligations pertain mainly to measures for socially acceptable Bonds payable1 payroll downsizing. We currently expect most of these to be used from 2022 to 2038. In so doing, sums ear-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 Commerical paper Bank debt Other financial liabilities socially acceptable payroll downsizing are signed by affected employees. Collateral for trading activities € million Non- current 2,411 2,014 Miscellaneous other financial liabilities 2,373 Current 2,710 3,569 4,239 478 Provisions for purchase and sales obligations primarily relate to contingent losses from 6,798 10,996 pending transactions. 1 Including hybrid bonds classified as debt as per IFRS. Non- current 549 Current 1,528 83 1,874 3,951 716 448 1,247 From the current perspective, we expect that the majority of the provisions for the dis- mantling of wind farms will be used from 2022 to 2046, and the provisions for other The following overview shows the key data on the bonds of the RWE Group as of 31 Decem- dismantling and retrofitting obligations will be used from 2022 to 2060. ber 2021: Bonds payable Issuer Outstanding amount RWE AG RWE AG RWE AG RWE AG RWE AG RWE AG € 12 million € 282 million1 US$ 317 million1 € 500 million € 750 million € 600 million Bonds payable 1 Hybrid bonds classified as debt as per IFRS. Carrying amount € million 12 281 278 500 747 593 2,411 Coupon in % Maturity 3.5 3.5 6.625 0.625 October 2037 April 2075 July 2075 June 2031 0.5 November 2028 1.0 November 2033 149 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In June 2021, RWE issued a green corporate bond with a volume of €500 million and a (25) Other liabilities maturity of ten years. Based on a coupon of 0.625 % p.a. and an issue price of 99.711 %, the yield-to-maturity amounts to 0.655 % p.a. In accordance with RWE’s guidelines for green Other liabilities 31 Dec 2021 31 Dec 20201 bonds, the RWE Green Bond Framework, the proceeds from the issue may only be used for the financing or refinancing of wind and solar projects. RWE issued another green bond in November 2021. It consisted of two tranches, with a volume of €750 million and a maturity of seven years and a volume of €600 million and a maturity of twelve years, respectively. Based on a coupon of 0.5 % p. a. and an issue price of 99.808 %, the yield-to-maturity amounts to 0.528 % p. a. for the first tranche. The yield- to- maturity is 1.077 % p. a. for the second tranche, with a coupon of 1.0 % and an issue price of 99.138 %. In the previous year, a hybrid bond issued by RWE AG which was previously classified as debt pursuant to IAS 32 was cancelled on 4 September 2020. 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 2.75 % coupon and maturity ending in April 2075. € million Tax liabilities Social security liabilities Derivatives Miscellaneous other liabilities of which: financial debt of which: non-financial debt Non- current 1 873 855 Current 226 20 76,119 906 Non- current 1 554 800 1,729 77,271 1,355 961 768 76,677 594 640 715 Current 158 14 8,106 768 9,046 8,414 632 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). The increase in derivatives during the reporting period resulted from the significant price rises for over-the-counter commodity derivatives for electricity and natural gas, which €23 million of the financial liabilities are secured by mortgages (previous year: €31 million). cannot be netted. Other financial liabilities contain lease liabilities. (24) Income tax liabilities security institutions. Income tax liabilities contain uncertain income tax items in the amount of €905 million (previous year: €939 million). This item primarily includes income taxes for periods for which Miscellaneous other liabilities contain €150 million in contract liabilities (previous year: the tax authorities have not yet finalised a tax assessment and for the current year. €221 million). The principal component of social security liabilities are the amounts payable to social Moreover, €63 million (previous year: €66 million) in miscellaneous other liabilities were allocable to state investment subsidies primarily granted in connection with the construction of wind farms. 150 RWE Annual Report 2021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 • Equity instruments measured at fair value through other comprehensive income: the attributable to RWE shareholders by the average number of shares outstanding; treasury option to recognise changes in fair value directly in equity is exercised. shares are not taken into account in this calculation. • Financial assets measured at fair value through profit or loss: the contractual cash flows of Earnings per share 2021 20201 or the option to recognise changes in the fair value of equity instruments in other compre- a debt instrument do not solely consist of interest and principal on the outstanding capital Net income for RWE AG shareholders € million of which: from continuing operations of which: from discontinued operations 721 721 1,051 864 187 Number of shares outstanding (weighted average) in ‘000 676,220 637,286 hensive income is not exercised. On the liabilities side, non-derivative financial instruments principally include liabilities measured at amortised cost. Basic and diluted earnings per share of which: from continuing operations of which: from discontinued operations Dividend per share € € 1.07 1.07 0.902 1.65 1.36 0.29 0.85 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 develop- ments and corporate business plan data. Current market interest rates corresponding to 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see commentary on pages 108 et seq.). 2 Dividend proposal for fiscal 2021, subject to the resolution of the Annual General Meeting on 28 April 2022. the remaining maturity are used for discounting. (27) Reporting on financial instruments Derivative financial instruments are recognised at their fair values as of the balance-sheet date, insofar as they fall under the scope of IFRS 9. Exchange-traded products are measu- red using the published closing prices of the relevant exchange. Non-exchange traded Financial instruments are divided into non-derivative and derivative. Non-derivative products are measured on the basis of publicly available broker quotations or, if such financial assets essentially include other non-current financial assets, accounts receivable, quotations are not available, on generally accepted valuation methods. In doing so, we draw marketable securities and cash and cash equivalents. Financial instruments are recognised on prices on active markets as much as possible. If such prices are not available, company- either at amortised cost or at fair value, depending on their classification. Financial instru- specific planning estimates are used in the measurement process. These estimates ments are recognised in the following categories: encompass all of the market factors which other market participants would take into account in the course of price determination. Assumptions pertaining to the energy sector • Debt instruments measured at amortised cost: the contractual cash flows solely consist and economy are made within the scope of a comprehensive process with the involvement of interest and principal on the outstanding capital: there is an intention to hold the of both in-house and external experts. financial instrument until maturity. 151 RWE Annual Report 2021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 • Level 1: Measurement using (unadjusted) prices of identical financial instruments formed on conducted on the basis of the net risk exposure per business partner. active markets, • Level 2: Measurement on the basis of input parameters which are not the prices from The following overview presents the classifications of financial instruments measured at Level 1, but which can be observed for the financial instrument either directly (i. e. as fair value in the fair value hierarchy prescribed by IFRS 13. The individual levels of the fair price) or indirectly (i. e. derived from prices), value hierarchy are defined as follows: • Level 3: Measurement using factors which cannot be observed on the basis of market data. Fair value hierarchy € million Other financial assets1 Derivatives (assets) of which: used for hedging purposes Securities Derivatives (liabilities) of which: used for hedging purposes Total 31 Dec 2021 5,477 65,160 6,768 8,040 76,992 14,609 Level 1 Level 2 Level 3 Total 31 Dec 2020 Level 1 Level 2 Level 3 4,960 1,078 235 61,281 6,768 6,962 75,760 14,609 282 3,879 1,232 4,237 8,784 1,634 4,219 8,660 1,498 3,659 1,269 214 8,085 1,634 2,950 8,404 1,498 364 699 256 1 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 152 RWE Annual Report 2021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 number of price quotations, financial assets with a fair value of €13 million (previous year: value of €16 million (previous year: €43 million) were reclassified from Level 2 to Level 1 €93 million) were reclassified from Level 1 to Level 2. and €93 million (previous year: €0 million) to Level 3. Conversely, due to a drop in the The development of the fair values of Level 3 financial instruments is presented in the following table: Level 3 financial instruments: Development in 2021 € million Other financial assets Derivatives (assets) Derivatives (liabilities) Level 3 financial instruments: Development in 2020 € million Other financial assets1 Derivatives (assets) Assets held for sale Derivatives (liabilities) Liabilities held for sale Balance at 1 Jan 2021 Changes in the scope of consolidation, currency adjustments and other 364 699 256 – 95 – 29 Balance at 1 Jan 2020 Changes in the scope of consolidation, currency adjustments and other 350 665 8 577 4 – 52 – 9 – 9 – 8 – 4 Changes Recognised in OCI – 103 Changes Recognised in OCI 98 Recognised in profit or loss 21 3,466 1,190 Recognised in profit or loss – 85 42 – 313 With a cash effect 95 – 286 – 185 With a cash effect 53 1 1 Balance at 31 Dec 2021 282 3,879 1,232 Balance at 31 Dec 2020 364 699 256 1 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see commentary on page 95). 153 RWE Annual Report 2021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 loss € million Other operating income / expenses Income from investments Level 3 derivative financial instruments essentially consist of energy purchase and commo- dity 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 particu- lar. 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 €82 million (previous year: €95 million) or decline by €82 million (previous year: €95 million). Total 2021 2,276 21 2,297 Of which: attributable to financial instruments held at the balance-sheet date 2,277 20 2,297 Total 2020 356 – 86 270 Of which: attributable to financial instruments held at the balance-sheet date 852 – 85 767 154 RWE Annual Report 2021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 carrying amounts of financial assets and liabilities within the scope of IFRS 7 basically the following carrying amounts according to IFRS 9 in the year under review: correspond to their fair values. The only deviations are for financial liabilities. The carrying Carrying amounts by category € million Financial assets measured at fair value through profit or loss of which: obligatorily measured at fair value – continuing operations Debt instruments measured at amortised cost1 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 Financial liabilities measured at amortised cost of which: held for sale 1 Restated prior-year figure. 31 Dec 2021 31 Dec 2020 amounts to €16,419 million (previous year: €4,281 million). Of this, €2,460 million amount of these is €16,385 million (previous year: €4,011 million), while the fair value 65,854 65,854 24,911 10,566 10,566 10,766 2 (previous year: €607 million) is related to Level 1 and €13,959 million (previous year: €3,674 million) to Level 2 of the fair value hierarchy. The following net results from financial instruments as per IFRS 7 were recognised on the income statement, depending on the category: 1,236 1,338 Net gain / loss by category € million 2021 2020 Financial assets and liabilities measured at fair value through profit or loss – 1,270 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 – 1,270 600 3,318 3,318 – 248 59 – 7 194 193 – 648 – 303 4,819 62,384 62,384 21,359 3,702 7,163 7,163 7,013 315 155 RWE Annual Report 2021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 In fiscal 2021, €194 million (previous year: €193 million) in income from dividends from measurement of financial instruments at fair value. these financial instruments was recognised, of which €0 million (previous year: €5 million) The option to recognise changes in fair value in OCI is exercised for a portion of the invest- their fair value at the derecognition date amounted to €782 million. The resulting loss ments in equity instruments. These are strategic investments and other long-term invest- amounted to €18 million in the previous year. was attributable to equity instruments sold during the same year. In the previous year, ments. Fair value of equity instruments measured at fair value through other comprehensive income € million Nordsee One GmbH E.ON SE The following is an overview of the financial assets and financial liabilities which are netted out in accordance with IAS 32 or are subject to enforceable master netting agreements or similar agreements. The netted financial assets and liabilities essentially consist of collateral 31 Dec 2021 31 Dec 2020 for stock market transactions due on a daily basis. 17 4,802 120 3,582 The related amounts not set off include cash collateral received and pledged for over-the- counter transactions as well as collateral pledged in advance for stock market transactions. Netting of financial assets and financial liabilities as of 31 Dec 2021 Gross amounts recognised Netting Net amounts recognised Related amounts not set off Net amount € million Derivatives (assets) Derivatives (liabilities) 69,985 69,714 Netting of financial assets and financial liabilities as of 31 Dec 2020 Gross amounts recognised – 65,273 – 61,564 Netting € million Derivatives (assets) Derivatives (liabilities) Financial instruments Cash collateral received / pledged 4,712 8,150 – 1,107 – 4,039 – 7,004 673 39 Net amounts recognised Related amounts not set off Net amount Financial instruments Cash collateral received / pledged 10,111 8,024 – 9,209 – 7,439 902 585 – 267 – 495 – 310 407 8 156 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information As an energy producer with international operations, the RWE Group is exposed to market, indicators such as the Value at Risk (VaR) and sensitivities, amongst other things. In addition, for credit and liquidity risks in its ordinary business activity. We limit these risks via systematic, the management of interest rate risk, a Cash Flow at Risk (CFaR) is determined. groupwide risk management. The range of action, responsibilities and controls are defined in binding internal directives. Using the VaR method, RWE determines and monitors the maximum expected loss arising from changes in market prices with a specific level of probability during specific periods. Market risks stem from changes in exchange rates and share prices as well as interest Historical price volatility is taken as a basis in the calculations. With the exception of the rates and commodity prices, which can have an influence on business results. 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 % and a holding period of one year is Due to the RWE Group’s international profile, currency management is a key issue. Fuels are taken as a basis. traded in British pounds and US dollars as well as in other currencies. In addition, RWE does business in a number of currency areas. The companies of the RWE Group are required to In respect of interest rate risks, RWE distinguishes between two risk categories: on the one hedge their foreign currency risks via RWE AG. Foreign currency risks arising from the invol- hand, increases in interest rates can result in declines in the prices of securities from the vement in and the financing of the renewable energy business are hedged by RWE Renewa- holdings of RWE. This pertains primarily to fixed-rate instruments. Starting from fiscal 2021, bles International Participations B.V. price risk is measured using sensitivity analysis in relation to an interest rate change of 100 basis points. As of the balance- sheet date, it amounted to €28.2 million (previous Interest rate risks stem primarily from financial debt and the Group’s interest-bearing inves- year: €2.5 million). On the other hand, financing costs also increase along with the level of tments. We hedge against negative changes in value caused by unexpected interest-rate interest rates. The sensitivity of interest expenses to increases in market interest rates is movements using non-derivative and derivative financial instruments. measured with the CFaR. As of 31 December 2021 this amounted to €2.0 million (previous year: €18.6 million). RWE calculates the CFaR based on the assumption of the refinancing Opportunities and risks from changes in the values of non-current securities are centrally of maturing debt. controlled by a professional fund management system operated by RWE AG. The Group’s other financial transactions are recorded using centralised risk management measured using sensitivity analysis, which shows the impact on the value of the position software and monitored by RWE AG. stemming from a 10 % change in the exchange rate. As of 31 December 2021, this sensiti- Starting from fiscal 2021, risks related to financial positions in foreign currency are also vity was €0.3 million (previous year: €0.4 million). For commodity operations, risk management directives have been established by RWE AG’s Controlling & Risk Management Department. These regulations stipulate that derivatives Since fiscal 2021, we also measure the price risk of equities in RWE’s portfolio using sensiti- may be used to hedge price risks. Furthermore, commodity derivatives may be traded, subject vity analysis. As of the balance-sheet date, this analysis yielded the following results (before to limits. Compliance with limits is monitored daily. taxes): In the event of a 10 % rise in the relevant equity prices, equity would increase by Risks stemming from fluctuations in commodity prices and financial market risks (foreign In the event of a 10 % fall in the relevant equity prices, equity would decrease by €490 million currency risks, interest rate risks, securities risks) are monitored and managed by RWE using (previous year: €358 million) and income by €9 million (previous year: €0 million). €490 million (previous year: €358 million) and income by €9 million (previous year: €0 million). 157 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The key internal control parameters for commodity positions at RWE Supply & Trading are One of our most important instruments to limit market risk is the conclusion of hedging the VaR for the trading business and the VaR for the pooled gas and liquefied natural gas transactions. The instruments most commonly used are forwards and options with foreign (LNG) business. Here, the maximum VaR is €50 million and €25 million, respectively. As of currency, interest rate swaps, interest rate currency swaps, equity capital derivatives, and 31 December 2021, the VaR was €30.6 million in the trading business (previous year: forwards, options, futures and swaps with commodities. €25.0 million) and €14.9 million for the pooled gas and LNG business (previous year: €6.7 million). Maturities of derivatives related to interest rates, currencies, equity capital, indices and commodities for the purpose of hedging are based on the maturities of the underlying Additionally, stress tests are carried out on a monthly basis in relation to the trading and transactions and are thus primarily short term and medium term in nature. Hedges of the pooled LNG and gas business of RWE Supply & Trading to model the impact of commodity foreign currency risks of foreign investments have maturities of up to ten years. price changes on the earnings conditions and take risk-mitigating measures if necessary. In these stress tests, market price curves are modified, and the commodity position is re- All derivative financial instruments within the scope of IFRS 9 are recognised as assets or valued on this basis. Historical scenarios of extreme prices and realistic, fictitious price liabilities and are measured at fair value. When interpreting their positive and negative fair scenarios are modelled. In the event that the stress tests exceed internal thresholds, values, it should be taken into account that, with the exception of trading in commodities, these scenarios are then analysed in detail in relation to their impact and probability, these financial instruments are generally matched with underlying transactions that carry and – if necessary – risk-mitigating measures are considered. offsetting risks. Commodity risks of the Group’s power generation companies belonging to the Coal / Nuclear Hedge accounting pursuant to IFRS 9 is used primarily for mitigating currency risks from net and Hydro / Biomass / Gas segments are managed by the Commodity Management investments in foreign functional currencies, commodity market price risks, interest risks Commitee (CMC) and hedged by the Supply & Trading segment on the basis of available from non-current liabilities 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 concept. As a result, these positions are not included in the In the previous year, fair value hedges were used to limit the market price risk exposure related to CO2 emission allowances. In the case of fair value hedges, both the derivative as well as the underlying hedged transaction (in relation to the hedged risk) are recorded at VaR figures. Above and beyond open production positions which have not yet been fair value with an effect on income. transferred, the Group companies belonging to the Coal / Nuclear and Hydro / Biomass / Gas segments are not allowed to maintain significant risk positions, 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 independently, in compliance with unbundling regulations. 158 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information In the previous year, RWE held the following instruments to hedge the fair value of commodity RWE held the following instruments to hedge future cash flows relating to foreign currency risks: price risks: Fair value hedges as of 31 Dec 2020 CO2 derivatives Nominal volume (€ million) Secured average price (€ / metric ton) Maturity 1 – 6 months 7 – 12 months > 12 months 39 5.57 Cash flow hedges as of 31 Dec 2021 Currency forwards – purchases Nominal volume (€ million) Avg. EUR / USD exchange rate Avg. EUR / GBP exchange rate Avg. EUR / CAD exchange rate Cash flow hedges are primarily used to hedge against interest risks from non-current Avg. EUR / DKK exchange rate liabilities as well as currency and price risks from sales and purchase transactions. Hedging instruments consist of forwards, swaps and options with foreign currency and interest rates, and forwards, futures and swaps with commodities. Changes in the fair value of the hedging instruments – insofar as they affect the effective portion – are recorded in other compre- Avg. EUR / SGD exchange rate Avg. EUR / CHF exchange rate Currency forwards – sales Maturity 1 – 6 months 7 – 12 months > 12 months 850 1.17 0.86 1.60 1.59 1.10 377 1.19 0.86 1.48 1.60 686 1.17 0.89 1.65 7.44 1.62 hensive income until the underlying transaction is realised. The ineffective portion of Nominal volume (€ million) – 1,001 – 554 – 2,188 changes in value is recognised in profit or loss. When hedging commodities, underlying and Avg. EUR / USD exchange rate hedging transactions are based on the same price index. This generally does not result in Avg. EUR / GBP exchange rate ineffectiveness. When hedging foreign currency risks, ineffectiveness can result from the difference in timing between the 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 recognised on the income statement or is offset against the initial value recognition of an asset or a liability. Avg. EUR / CAD exchange rate Avg. EUR / DKK exchange rate 1.19 0.87 1.47 1.18 0.88 1.45 1.26 0.90 7.45 159 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information 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 The commercial optimisation of the power plant portfolio is based on a dynamic hedging 1 – 6 months 7 – 12 months > 12 months strategy. Hedged items and hedging instruments are constantly adjusted based on changes in market prices, market liquidity and the sales business with consumers. Commodity prices 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 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, the amount of the effective portion is recorded under foreign currency translation adjustments in other comprehensive income. The forward and spot elements of the hedging instruments used in net investment hedges are treated separately and only the value of the spot element is designated. In these cases, the fair value change of the forward element (hedging costs) is recognised in other compre- RWE held the following instruments to hedge future cash flows relating to interest risks: hensive income to the extent that the fair value change relates to the hedged net invest- Cash flow hedges as of 31 Dec 2021 Interest swaps Maturity amortised over the duration of the hedging instrument using the straight-line method and ment. Moreover, the fair value of the forward element as of the time of designation is 1 – 6 months 7 – 12 months > 12 months recognised in profit or loss. Nominal volume (£ million) Secured average interest rate (%) 950 1.62 1,155 1.82 Cash flow hedges as of 31 Dec 2020 Interest swaps Nominal volume (£ million) Secured average interest rate (%) Maturity 1 – 6 months 7 – 12 months > 12 months 1,215 1.55 160 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information RWE held the following instruments to hedge net investments in foreign operations: Net investment hedges as of 31 Dec 2021 Currency forwards – purchases Nominal volume (€ million) Avg. EUR / GBP exchange rate Currency forwards – sales Nominal volume (€ million) Avg. EUR / GBP exchange rate 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 59 0.84 – 702 0.86 – 557 0.86 Maturity 2,888 0.88 – 7,507 0.87 1 – 6 months 7 – 12 months > 12 months 277 0.90 – 5,737 0.91 – 631 0.63 161 RWE Annual Report 2021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 2021 € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks Nominal amount 1,866 – 70 6,8901 Carrying amount Fair value changes in the current period Recognised ineffectiveness Assets Liabilities 67 1 6,242 14,146 – 93 3 – 7,899 5 327 – 386 70 1 The net nominal amount stated is made up of purchases in the amount of €7,733 million and sales in the amount of –€14,623 million. 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. 162 RWE Annual Report 2021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 € million Assets Liabilities Assets Liabilities Changes in fair value in the reporting year € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges 44 – 78 – 1,528 – 50 – 59 3,094 Commodity price risks 231 192 56 Foreign currency risks 117 1,275 – 14 – 11 350 Cash flow hedges and net investment hedges as of 31 Dec 2021 Changes in fair value during the current period Reserve for current hedges Reserve for terminated hedges € million Cash flow hedges Interest risks Foreign currency risks Commodity price risks Net investment hedges Foreign currency risks In the previous year, the carrying amounts of the hedged items for fair value hedges were stated in the ‘other receivables and other assets’ balance-sheet item. Amounts realised from other comprehensive income 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 other comprehensive income are recognised in the items ‘revenue’ and 'cost of materials’, whereas any ineffectiveness is recognised in ‘other 54 14 – 68 1 – 4,973 – 1,567 14 1 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. – 413 836 350 163 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information The reconciliation of the changes in the hedge reserve in relation to the various risk categories of hedge accounting follows below: Hedge reserve 2021 € million Balance at 1 Jan 2021 Cash flow hedges Effective portion of changes in market value Interest risks Foreign currency risks Commodity price risks Gain or loss reclassified from OCI to the income statement – realisation of underlying transactions Foreign currency risks Commodity price risks 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 Fair value changes of hedging costs Amortisation of hedging costs Balance at 31 Dec 2021 Hedge reserve 20201 € million Balance at 1 Jan 2020 Cash flow hedges 1,837 Effective portion of changes in market value Interest risks Foreign currency risks Commodity price risks Gain or loss reclassified from OCI to the income statement – realisation of underlying transactions Foreign currency risks Commodity price risks 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 1 Some prior-year figures restated. – 5,243 3 – 14 – 5,232 470 25 445 – 586 – 3 – 583 1,222 – 414 – 414 414 24 33 – 2,243 164 2,946 – 1,800 – 55 34 – 1,779 1,256 1,256 – 982 1 – 982 417 – 147 – 147 147 1,837 RWE Annual Report 2021 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 current system for determining reference interest rates (the hedging relationships directly affected by IBOR reform. The reliefs primarily mean that the so-called IBOR reform), the existing reference rates and methods for determining such were uncertainties arising from the IBOR reform do not result in discontinuation of the hedging replaced with alternative interest rates and methods. In the EU, the EONIA was discontinued relationships. Hedge ineffectiveness continues to be recognised in the profit or loss. on 3 January 2022, and in the United Kingdom the LIBOR was phased out after 31 Decem- ber 2021. At the time of the aforementioned contractual adjustments in January 2022, RWE also applied the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate With regard to the RWE Group, the IBOR reform impacts the accounting treatment of Benchmark Reform - Phase 2, which were published in August 2020. These amendments certain financial liabilities and hedging relationships which serve to reduce the interest rate allow for other temporary reliefs for the accounting treatment of hedging relationships risks associated with non-current liabilities. These hedging relationships are based on the which are affected by the IBOR reform. 1-month GBP LIBOR and the 6-month GBP LIBOR. As of 31 December 2021, the transition to alternative interest rates was not yet complete. The designated hedging instruments had Credit risks. In the fields of finance and commodities, RWE primarily has credit relationships a nominal volume of €1,318 million and a carrying amount of €47 million as of the repor- with banks that have good creditworthiness and other trading partners with predominantly ting date. The total carrying amount of the hedged financial liabilities was €1,413 million as good creditworthiness. Furthermore, RWE has credit relationships primarily with banks and of the reporting date. other business partners with good creditworthiness within the scope of large-scale projects such as the construction of wind farms. RWE reviews counterparty default risks before RWE is managing the transition to the new benchmark rates by way of an interdisciplinary contracts are concluded. RWE mitigates such risks by establishing limits which are adjusted working group headed by the Finance & Credit Risk Department. Its focus is on supplemen- during the business relationships if the creditworthiness of the business partners changes. ting, amending and reassessing the relevant contracts and carrying out the technically Counterparty risks are monitored constantly so that countermeasures can be initiated early necessary system adjustments. With regard to the financial liabilities and derivatives on. Furthermore, RWE is exposed to credit risks due to the possibility of customers failing to designated in hedging relationships, RWE has initiated negotiations with the contractual meet their payment obligations. We identify these risks by conducting regular analyses of the partners to transition the interest rates previously based on the GBP LIBOR to the GBP creditworthiness of our customers and initiate countermeasures if necessary. SONIA plus a spread which offsets the difference between the two reference rates. The amended credit contracts were concluded on 10 January 2022, with an effective transition Due to the coronavirus crisis, the economic situation of many companies deteriorated. While to SONIA as of 31 January 2022. As part of the transition from GBP LIBOR to SONIA plus a the current economic recovery is leading to an improvement in their situation, RWE’s spread, the hedging instruments which hedged the previous interest rate risk from the GBP business partners, competitors and customers may continue to be impacted by the LIBOR were also adjusted. The hedging relationships were adjusted on 10 January 2022, consequences of the crisis, as well as by the very strong price developments seen on the with effective transition as of 31 January 2022. energy markets since the fourth quarter of 2021. RWE is thus carefully monitoring critical branches of the economy and exercising greater caution when conducting new transactions Starting from 1 January 2020, RWE applied the amendments in IFRS 9, IAS 39 and IFRS 7 – or extending existing ones. If necessary, previously approved limits are being lowered. Interest Rate Benchmark Reform, which were published in September 2019. The amend- ments provide temporary relief from applying specific hedge accounting requirements to 165 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Amongst other things, RWE demands guarantees, cash collateral and other forms of • Stage 1 – Expected 12-month credit losses: At initial recognition, financial assets are security in order to mitigate credit risks. Furthermore, RWE takes out credit insurance policies generally assigned to this stage – with the exception of those that have been purchased to protect against defaults. Bank guarantees received as collateral are from financial or originated credit impaired, which are thus considered separately. The level of impair- institutions with the required good ratings. Collateral for credit insurance is pledged by insurers ment results from the cash flows expected for the entire term of the financial instrument, with an investment-grade rating. multiplied by the probability of a default within 12 months from the reporting date. The effective interest rate used for measurement is determined on the basis of the carrying The maximum balance-sheet default risk is derived from the carrying amounts of the amount before impairment (gross). financial assets stated on the balance sheet. The default risks for derivatives correspond • Stage 2 – Lifetime expected credit losses (gross): If the credit risk has risen significantly to their positive fair values. Risks can also stem from financial guarantees and loan between initial recognition and the reporting date, the financial instrument is assigned to commitments which we have to fulfil vis-à-vis external creditors in the event of a default of this stage. Unlike Stage 1, default events expected beyond the 12-month period from the a certain debtor. As of 31 December 2021, these obligations amounted to €1,231 million reporting date are also considered in calculating the impairment. The effective interest (previous year: €417 million). As of 31 December 2021, default risks were balanced rate used for measurement is still determined on the basis of the carrying amount before against credit collateral, financial guarantees, bank guarantees and other collaterals impairment (gross). amounting to €10.1 billion (previous year: €3.6 billion). Of this, €0.6 billion relates to trade • Stage 3 – Lifetime expected credit losses (net): If in addition to the criteria for Stage 2 receivables (previous year: €0.8 billion), €1.5 billion to derivatives used for hedging there is an objective indication of an impairment, the financial asset is assigned to purposes (previous year: €0.6 billion), and €8.0 billion to other derivatives (previous year: Stage 3. The impairment is calculated analogously to Stage 2. In this case, however, the €2.2 billion). There were no material defaults in fiscal 2021 or the previous year. effective interest rate used for measurement is applied to the carrying amount after In the RWE Group, the risk provision for financial assets is determined on the basis of expected impairment (net). credit losses. These are determined on the basis of the probability of default, loss given default In the RWE Group, risk provisions are formed for financial instruments in the following and the exposure at default. We determine the probability of default and loss given default categories: using historical data and forward-looking information. The exposure at default date for financial assets is the gross carrying amount on the balance-sheet date. The expected • debt instruments measured at amortised cost, credit loss for financial assets determined on this basis corresponds to the difference • debt instruments measured at fair value through other comprehensive income. between the contractually agreed payments and the payments expected by RWE, discoun- ted by the original effective interest rate. The assignment to one of the levels described below influences the level of the expected losses and the effective interest income recognised. 166 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information For debt instruments for which there has been no significant rise in credit risk since initial We draw conclusions about the potential default of a counterparty from information from recognition, a risk provision is recognised in the amount of the expected 12-month credit internal credit risk management. If internal or external information indicates that the losses (Stage 1). In addition, a financial instrument is assigned to Stage 1 of the impairment counterparty cannot fulfil its obligations, the associated receivables are classified as model if the absolute credit risk is low on the balance-sheet date. The credit risk is classified unrecoverable and assigned to Stage 3 of the impairment model. Examples of such as low if the debtor’s internal or external rating is investment-grade. For trade accounts information are: receivable, the risk provision corresponds to the lifetime expected credit losses (Stage 2). To determine whether a financial instrument is assigned to Stage 2 of the impairment • The debtor has already committed a breach of contract by missing or delaying payments. model, it must be determined whether the credit risk has increased significantly since initial • Concessions already had to be made to the debtor. recognition. To make this assessment, we consider quantitative and qualitative information • An insolvency or another restructuring procedure is impending. supported by our experience and assumptions regarding future developments. In so doing, • The market for the financial asset is no longer active. special importance is accorded to the sector in which the RWE Group’s debtors are active. • A sale is only possible at a high discount, which reflects the debtor’s reduced creditwort- • The debtor of the receivable has apparent financial difficulties. Our experience is based on studies and data from financial analysts and government hiness. authorities, amongst others. Special attention is paid to the following developments: assumed if the contractually agreed payments are more than 90 days overdue and there is A payment default and an associated assignment of the financial asset to Stage 3 is also no information disproving the assumption of a payment default. Based on our experience, • significant deterioration of the internal or external rating of the financial instrument, we generally assume that this assumption does not apply to trade accounts receivable. • unfavourable changes in risk indicators, e. g. credit spreads or debtor-related credit default swaps, A financial asset is depreciated if there are indications that the counterparty is in serious • negative development of the debtor’s regulatory, technological or economic environment, financial difficulty and the situation is unlikely to improve. We may also take legal recourse • danger of an unfavourable development of business resulting in a significant reduction and other measures in order to enforce the contractually agreed payments in the event in operating income. 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. 167 RWE Annual Report 2021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 2021 Remeasurement due to new measurement parameters Redeemed or derecognised financial assets Level transfer Balance at 31 Dec 2021 Impairment of financial assets € million Financial receivables Balance at 1 Jan 2020 Remeasurement due to new measurement parameters Level transfer Balance at 31 Dec 2020 Stage 1 – 12-month expected credit losses Stage 2 – lifetime expected credit losses Stage 3 – lifetime expected credit losses 6 – 2 – 1 3 13 – 2 11 2 2 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 Total 19 – 2 – 3 2 16 Total 25 – 5 – 1 19 168 RWE Annual Report 2021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 2021 Addition Redeemed / derecognised Changes in the scope of consolidation Balance at 31 Dec 2021 Risk provision for trade accounts receivable € million Balance at 1 Jan 2020 Addition Changes in the scope of consolidation Balance at 31 Dec 2020 42 16 – 25 – 5 28 32 13 – 3 42 169 RWE Annual Report 2021 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 2021 € 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 20201 € million Class 1 – 5: low risk Class 6 – 9: medium risk Class 10: high risk Class 11: doubtful Class 12: loss 1 Some prior-year figures restated. 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 38 Stage 1 – 12-month expected credit losses 18,502 776 37 1 19,316 38 Stage 2 – lifetime expected credit losses 42 Stage 1 – 12-month expected credit losses 9,000 59 19 9,078 42 170 Stage 3 – lifetime expected credit losses Trade accounts receivable 6,330 345 138 10 38 2,779 153 85 14 37 11 1 12 11 1 12 6,861 26,227 Stage 3 – lifetime expected credit losses Trade accounts receivable Total 24,870 1,132 175 11 39 Total 11,821 223 104 14 38 3,068 12,200 RWE Annual Report 2021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, The volume of RWE AG’s credit line amounts to €5 billion. Its two tranches expire in Ap- there is a risk that liquidity reserves will prove to be insufficient to meet financial obligations ril 2022 (€2 billion) and April 2026 (€3 billion). The commercial paper programme allows for in a timely manner. In 2022, liabilities owed to banks of €3.6 billion (previous year: issuance up to a maximum amount of €5 billion (previous year: €5 billion). As of the balance- €0.1 billion) are due. Above and beyond this, commercial paper in the amount of €2.7 billi- sheet date, €2.7 billion of this programme was used (previous year: €0 billion). Above and on matures in 2022 (previous year: €0 billion). beyond this, RWE AG can finance itself using a €10 billion debt issuance programme; as of the balance- sheet date, outstanding bonds from this programme amounted to €1.85 billion As of 31 December 2021, holdings of cash and cash equivalents and current marketable (previous year: €0 billion) at RWE AG. Accordingly, the RWE Group's medium- term liquidity securities amounted to €13,865 million (previous year: €8,993 million). risk can be classified as low. Redemption and interest payments on financial liabilities € million Bonds payable 1 Commercial paper Bank debt Lease liabilities Other financial liabilities Derivative financial liabilities Collateral for trading activities Miscellaneous other financial liabilities Financial liabilities falling under the scope of IFRS 7 are expected to result in the following (undiscounted) payments in the coming years: Redemption payments Interest payments 2022 2023 to 2026 From 2027 2022 2023 to 2026 From 2027 562 281 273 441 222 86 1,849 1,733 1,061 649 532 2 42 34 20 80 45 157 127 102 197 68 70 98 252 498 128 Carrying amounts 31 Dec 2021 2,411 2,710 5,583 1,409 1,442 2,710 3,568 86 374 76,992 76,250 4,239 4,975 4,239 4,892 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. 171 RWE Annual Report 2021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 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 Redemption payments Interest payments 2021 2022 to 2025 From 2026 2021 2022 to 2025 From 2026 85 86 350 7,857 716 2,645 282 140 263 324 201 82 267 1,385 957 476 605 2 27 26 22 50 20 110 44 91 149 78 22 9 404 472 151 1 Including hybrid bonds classified as debt as per IFRS, taking into account the earliest possible call date. Above and beyond this, as of 31 December 2021, there were financial guarantees for purchase contracts amounted to €22.3 billion as of 31 December 2021 (previous year: external creditors in the amount of €1,191 million (previous year: €364 million), which are €23.6 billion), of which €0.3 billion is due within one year (previous year: €0.3 billion). to be allocated to the first year of repayment. Additionally, Group companies have provided loan commitments to third-party companies amounting to €40 million (previous year: Gas purchases by the RWE Group are partially based on long-term take-or-pay contracts. €53 million), which are callable in 2022. The conditions in these contracts, which have terms up to 2036 in some cases, are renego- tiated by the contractual partners at certain intervals, which may result in changes in the Detailed information on the risks of the RWE Group and on the objectives and procedures reported payment obligations. Calculation of the payment obligations resulting from the of the risk management is presented on pages 70 et seqq. in the review of operations. purchase contracts is based on parameters from the internal planning. (28) Contingent assets, contingent liabilities and financial commitments Furthermore, RWE has long-term financial commitments for purchases of electricity. As As of 31 December 2021, the amount of contractual commitments totalled €5,668 mil- of 31 December 2021, the minimum payment obligations stemming from the major lion (previous year: €2,071 million). This mainly consisted of investment in property, plant purchase contracts totalled €7.1 billion (previous year: €7.1 billion), of which €0.4 billion is and equipment. due within one year (previous year: €0.3 billion). Above and beyond this, there are also long-term purchase and service contracts for uranium, conversion, enrichment and We have made long-term contractual purchase commitments for supplies of fuels, inclu- fabrication. ding natural gas in particular. Payment obligations stemming from the major long-term 172 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information We bear legal and contractual liability from our membership in various associations (29) Segment reporting which exist in connection with power plant projects, profit- and loss-pooling agreements RWE is divided into five segments, which are separated from each other based on functional and for the provision of liability cover for nuclear risks, amongst others. criteria. On the basis of a mutual benefit agreement, RWE AG and other parent companies of In the Offshore Wind segment, we report on our business in offshore wind, which is overseen German nuclear power plant operators undertook to provide approximately €2,244 million by RWE Renewables. The main production sites are located in the United Kingdom and in funding to liable nuclear power plant operators to ensure that they are able to meet their Germany. In addition to electricity generation, activities in this field also include the develop- payment obligations in the event of nuclear damages. From 1 January 2022 onwards, ment and realisation of projects to expand capacity. RWE AG has a 36.927 % contractual share in the liability (37.299 % until 31 December 2021) plus 5 % for damage settlement costs. Onshore Wind / Solar encompasses our activities with onshore wind, solar power and battery As part of the Group restructuring that occurred in fiscal 2016, a large portion of the ties. RWE Renewables has operating responsibility. Along with the USA, the main production pension commitments which up to then had been reported at the holding level were sites are located in the United Kingdom, Germany, Italy, Spain, Poland and the Netherlands, storage. Here again, in addition to electricity generation, the focus is on expanding capaci- transferred to former Group companies (former subsidiaries innogy SE, Essen, and affiliated as well as in Australia in the field of solar power. companies) by cancelling the performance obligation existing on an intra-group basis. The guarantees remaining vis-à-vis external parties were cancelled. The Group is liable for the Activities with run-of-river, pumped storage, biomass, and gas-fired power plants are accrued claims of the active and former employees of these companies in the amount of bundled in the Hydro / Biomass / Gas segment. It also contains the Dutch hard coal power €5,875 million (previous year: €6,404 million). stations Amer 9 and Eemshaven, which are increasingly co-firing biomass, and the company RWE Technology International, which specialises in project management and engineering RWE AG and its subsidiaries are involved in official, regulatory and antitrust proceedings, services. This segment is the responsibility of RWE Generation, which has also been respon- litigation and arbitration proceedings related to their operations and are affected by the sible for formulating and implementing our hydrogen strategy since 2021. The 37.9 % stake results of such. In some cases, out-of-court claims are also filed. However, RWE does not in the Austrian energy utility KELAG is also reported in the Hydro / Biomass / Gas segment. expect any material negative repercussions from these proceedings on the RWE Group’s economic or financial position. The Supply & Trading segment contains energy and commodities trading, the marketing and hedging of the RWE Group’s electricity position and the gas midstream business. This With the approval of the Senate, the Dutch Parliament passed an amendment of the Coal segment is the responsibility of RWE Supply & Trading, which also supplies certain major Phaseout Act, which limits the carbon dioxide emissions of power plants to 35% of the industrial and commercial customers with electricity and natural gas. Additionally, gas storage maximum possible level by the end of 2024. RWE will be entitled to compensation payments facilities in Germany and the Czech Republic also belong to this segment. for the economic disadvantages it will suffer. As foreseen in the Act, we expect to submit an application for compensation in the upper triple-digit million range in a timely manner. The Coal / Nuclear segment covers German electricity production using lignite and nuclear power, as well as lignite mining operations in the Rhineland. It also includes the investment in 173 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information the Dutch power plant operator EPZ (30 %) and URANIT (50 %), which holds a 33 % stake in ‘Other, consolidation’ covers RWE AG, consolidation effects and the activities of other Urenco, a uranium enrichment specialist. The aforementioned activities and investments business areas which are not presented separately. These activities primarily include our are the responsibility of the group company RWE Power. non-controlling interests in the German transmission system operator Amprion and in E.ON; the E.ON dividend is reported in the financial result. Segment reporting Divisions 2021 € 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 – 4,874 – 4,874 688 808 1,496 636 116 105 474 1,110 973 2,324 361 2,685 – 145 10 10 403 80 258 382 1,683 1,404 1,316 5,361 6,677 418 61 62 313 7 731 700 294 19,518 4 23,850 5,214 – 10,986 758 24,732 – 10,982 24,608 721 68 7 48 – 106 47 48 – 1 769 – 107 1,524 302 232 1,237 87 2,761 3 47 833 2,891 2 3,430 911 4,116 5,027 661 51 53 228 872 889 130 259 24,761 24,761 2,185 353 285 1,465 959 3,650 3,021 3,689 Regions 2021 € million External revenue 1, 2, 3 Intangible assets and property, plant and equipment Germany 9,081 4,941 UK Rest of Europe North America 8,259 13,045 6,051 3,402 810 4,261 Other 325 219 RWE Group 24,526 25,868 1 Excluding natural gas tax / electricity tax. 2 Broken down by the region in which the service was provided. 3 Including state subsidies received which do not conform to IFRS 15 and refunds paid to state bodies, among other things from CfD contracts, amounting to –€45 million in the UK, €2 million in Rest of Europe and €6 million in Other. 174 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Segment reporting Divisions 20201 € 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 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 2,159 138 15 4 385 79 523 171 756 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 – 25 123 124 – 25 830 382 13,424 1,589 261 306 1,138 704 2,727 3,149 2,106 854 3,075 3,929 234 95 95 325 1,097 559 127 183 – 3,457 – 3,457 13,896 13,896 1,823 356 401 1,463 1,801 3,286 3,276 – 4 2,285 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see pages 108 et seq.). Regions 2020 € million External revenue 1, 2, 3 Intangible assets and property, plant and equipment 4 Germany 3,988 5,714 UK Rest of Europe North America 3,909 10,811 3,958 3,049 1,146 2,953 Other 687 273 RWE Group 13,688 22,800 1 Excluding natural gas tax / electricity tax. 2 Broken down by the region in which the service was provided. 3 Including state subsidies received which do not conform to IFRS 15 and refunds paid to state bodies, among other things from CfD contracts, amounting to €31 million in the UK, €19 million in Rest of Europe and €1 million in Other. 4 Some prior-year figures restated due to retroactive adjustments to the first-time consolidation of operations which RWE acquired from Nordex in 2020 (see page 95). 175 RWE Annual Report 2021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 2021 € million External revenue1 of which: electricity2 of which: gas of which: other revenue Offshore Wind Onshore Wind / Solar Hydro /  Biomass / Gas 688 688 2,324 2,107 1,315 877 217 438 Supply & Trading 19,296 16,540 2,142 614 Other Core business 4 4 23,627 20,212 2,142 1,273 Coal / Nuclear 899 264 635 RWE Group 24,526 20,476 2,142 1,908 1 Excluding natural gas tax / electricity tax. 2 Including state subsidies received which do not conform to IFRS 15 and refunds paid to state bodies, among other things from CfD contracts, amounting to –€39 million in Offshore Wind and €2 million in Onshore Wind / Solar. External revenue by product in 2020 € million External revenue1 of which: electricity2 of which: gas of which: other revenue Offshore Wind Onshore Wind / Solar Hydro /  Biomass / Gas Supply & Trading Other Core business Coal /  Nuclear RWE Group 332 332 1,855 1,676 179 1,056 684 5 367 9,597 8,775 529 293 9 1 8 12,849 11,468 534 847 839 233 606 13,688 11,701 534 1,453 1 Excluding natural gas tax / electricity tax. 2 Including state subsidies received which do not conform to IFRS 15 and refunds paid to state bodies, among other things from CfD contracts, amounting to €51 million in Onshore Wind / Solar. Notes on segment data. The external revenue of the segments Offshore Wind and Onshore ting positive and negative deviations (in so-called two-way contracts for difference) and Wind / Solar contains state subsidies and refunds paid to state bodies for the sale of green negative deviations (in so-called one-way contracts for difference) from a defined reference electricity, including subsidies from contracts for differences, amounting to -€39 million price that is agreed with state contractual partners or the subsidy mechanism counterparty. (previous year: €0 million) and €2 million (previous year: €51 million), respectively, which do We report revenue between the segments as RWE intra-group revenue. Internal supply of not meet the definition of IFRS 15. These contracts for differences are used as a state subsi- goods and services is settled at arm’s length conditions. dy mechanism and essentially result in a fixed price for the electricity that is sold, by offset- 176 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Adjusted EBITDA is used for internal management. The following table presents the reconcilia- tion of adjusted EBITDA to adjusted EBIT and income from continuing operations before tax: Non-operating result € million Disposal result Reconciliation of income items € million Adjusted EBITDA 2021 20201 Impact of the valuation of derivatives on earnings 3,650 3,286 Other – Operating depreciation, amortisation and impairment losses – 1,465 – 1,463 Non-operating result 2021 20201 21 – 503 – 168 – 650 13 1,886 – 2,003 – 104 Adjusted EBIT + Non-operating result + Financial result 2,185 – 650 – 13 1,823 – 104 – 454 Income from continuing operations before tax 1,522 1,265 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see pages 108 et seq.). 1 Some prior-year figures restated due to a retroactive change in the recognition of tax benefits to subsidise renewable energy in the USA (see pages 108 et seq.). (30) Notes to the cash flow statement The cash flow statement classifies cash flows according to operating, investing and financing activities. Cash and cash equivalents in the cash flow statement correspond to the amount stated on the balance sheet. Cash and cash equivalents consist of cash on hand, demand deposits and fixed-interest marketable securities with a maturity of three months Income and expenses that are unusual from an economic perspective, or stem from or less from the date of acquisition. exceptional events, prejudice the assessment of operating activities. They are reclassified to the non-operating result. In addition to proceeds from the disposal of shareholdings or Among other things, cash flows from operating activities include: non-current assets not necessary for operations, this item mainly covers effects from the valuation of certain derivatives. These involve valuation effects which are only temporary • cash flows from interest and dividends of €263 million (previous year: €281 million) and and mainly arise because financial instruments to hedge price risks are reported at their fair cash flows used for interest expenses of €284 million (previous year: €299 million), value on the respective reporting date, while the hedged underlying transactions may only • €163 million (previous year:  -€72 million) in taxes on income paid (less refunds), be recorded with an effect on income upon the realisation of such. A loss of €168 million is • income from investments, corrected for items without an effect on cash flows, in particular reported in the item ‘other’ (previous year: – €2,003 million). The 2020 result included from accounting using the equity method, which amounted to €185 million (previous year: impairment charges on power plants and opencast lignite mines amounting to €1.8 billion. €323 million). Impairments were recognised in the lignite business during the reporting period as well, in the amount of €780 million. The compensation of €880 million paid to us in November Cash flows from the acquisition and sale of consolidated subsidiaries and other business 2021 by the German Federal government for the phaseout of nuclear energy in Germany units are included in cash flows from investing activities, while effects stemming from had a positive effect. exchange rate developments and other changes in value are shown separately. During the fiscal year, sales prices in the amount of €619 million (previous year: €872 million) were recognised for disposals resulting in a change of control. During the fiscal year, purchase 177 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information prices amounting to – €5 million (previous year: €270 million) were recognised for acquisi- tions which also resulted in a change of control. The pre-payment of a purchase price in the previous year, which was already reported in the cash flows from investing activities last year, is not included in this figure, as there had been no change of control at that point in time. As in the previous year, sales prices received and purchase prices paid were effected exclusively in cash. In relation to this, cash and cash equivalents (disregarding assets held for Balance-sheet items 2020 € million Non-current assets Intangible assets Property, plant and equipment sale) were acquired in the amount of €52 million (previous year: €0 million) and were sold in Other non-current assets the amount of €39 million (previous year: €5 million). With regard to subsidiaries or other business units of which control was gained or lost, the amounts of assets and liabilities (with the exception of cash and cash equivalents) are presented in the following, broken down by main groups: Current assets Non-current liabilities Provisions Balance-sheet items 2021 € 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 Additions Disposals Financial liabilities Other non-current liabilities Current liabilities 2,073 951 1,003 119 786 29 119 638 Cash flows from financing activities of continuing operations include €575 million (previous year: €492 million) which was distributed to RWE shareholders, and €155 million (previ- 451 1,238 ous year: €30 million) which was distributed to non-controlling shareholders. Furthermore, cash flows from financing activities include purchases of €1 million (previous year: €485 million) and sales in the amount of -€7 million (previous year: €562 million) of shares in subsidiaries and other business units which did not lead to a change of control. 189 116 24 49 201 1 175 25 Additions Disposals 541 395 133 13 10 48 48 89 131 6 120 5 1,357 20 3 11 6 584 Current liabilities 27 654 178 RWE Annual Report 2021 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: Development of financial liabilities 1 Jan 2021 € million Current financial liabilities Non-current financial liabilities Other items 1,247 3,951 Development of financial liabilities 1 Jan 2020 € million Current financial liabilities Non-current financial liabilities Other items 1,689 3,924 Increase /  repayment 9,535 2,862 – 10,026 Increase /  repayment 15 592 – 546 Changes in the scope of consolidation – 1 – 138 Changes in the scope of consolidation 38 – 289 Currency effects Changes in fair values Other changes 31 Dec 2021 – 206 241 148 273 – 118 10,996 6,798 Currency effects Changes in fair values 15 – 183 – 276 Other changes – 234 – 93 31 Dec 2020 1,247 3,951 The amount stated in the ‘other items’ line item contains cash- effective changes resulting (31) Related party disclosures from derivative financial instruments and margin payments, which are recognised in cash Within the framework of their ordinary business activities, RWE AG and its subsidiaries have flows from financing activities in the cash flow statement and in financial liabilities in the business relationships with numerous companies. These include associated companies balance sheet. and joint ventures, which are classified as related parties. In particular, this category includes material investments of the RWE Group, which are accounted for using the equity The item ‘other changes’ includes interest expenses which are reported in cash flows from method. operating activities. Restrictions on the disposal of cash and cash equivalents amounted to €4 million (previous year: €45 million). 179 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Business transactions were concluded with major associates and joint ventures, resulting in Key management personnel (Executive and Supervisory Board members) received the following items in RWE’s consolidated financial statements: €11,673,000 in short-term compensation components for fiscal 2021 (previous year: Key items from transactions with associates and joint ventures € million Income Expenses Receivables Liabilities Associated companies Joint ventures amounted to €3,191,000 (previous year: €4,731,000) and the pension service cost €8,357,000). Additionally, share-based payments within the framework of LTIP SPP 2021 2020 597 370 170 247 320 187 119 134 2021 140 30 56 65 2020 182 46 49 72 amounted to €0 (previous year: €595,000). Share-based payment was measured accor- ding to IFRS 2 and service cost for pensions according to IAS 19. Provisions totalling €11,334,000 (previous year: €32,959,000) were formed for obligations vis-à-vis key management personnel. The following information pertains to total remuneration pursuant to the guidelines of German commercial law. The key items from transactions with associates and joint ventures mainly stem from supply €8,501,000). This contains share- based payments amounting to €4,417,000 (129,635 and service transactions. In addition to supply and service transactions, there are also RWE performance shares) granted within the framework of the LTIP SPP. In the previous financial links with joint ventures. During the reporting period, income of €1 million (previous year, share-based payments amounting to €2,934,000 (111,070 RWE performance In total, the remuneration of the Executive Board amounted to €12,234,000 (previous year: year: €0 million) was recorded from interest-bearing loans to joint ventures. As of the shares) were granted. balance-sheet date, financial receivables accounted for €44 million of the receivables from joint ventures (previous year: €42 million). All transactions were completed at arm’s length Including remuneration from subsidiaries for the exercise of mandates, the Supervisory Board conditions, i. e. on principle the conditions of these transactions did not differ from those received total remuneration of €3,571,000 (previous year: €2,880,000) in fiscal 2021. The with other enterprises. €173 million of the receivables (previous year: €124 million) and employee representatives on the Supervisory Board have labour contracts with the €266 million of the liabilities (previous year: €162 million) fall due within one year. Other obli- respective Group companies. Remuneration occurs in accordance with the relevant gations from executory contracts amounted to €114 million (previous year: €112 million). contractual conditions. Above and beyond this, the RWE Group did not execute any material transactions with During the period under review, no loans or advances were granted to members of the related companies or persons. Executive Board. Two employee representatives on the Supervisory Board had employee The members of the Executive Board and Supervisory Board of RWE AG are deemed to be loans totalling €17,000. key management personnel for the RWE Group, in respect of whom the following informati- Former members of the Executive Board and their surviving dependants received on on total compensation is to be reported pursuant to IAS 24. €11,432,000 (previous year: €10,962,000), of which €678,000 came from subsidiaries (previous year: €671,000). As of the balance-sheet date, €148,241,000 (previous year: €145,620,000) were accrued for defined benefit obligations to former members of the 180 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information Executive Board and their surviving dependants. Of this, €6,405,000 was set aside at (33) Application of the exemption rule pursuant to Sec. 264, Para. 3 and Sec. 264b of subsidiaries (previous year: €6,925,000). the German Commercial Code In fiscal 2021, the following German subsidiaries made partial use of the exemption clause Information on the members of the Executive and Supervisory Boards is presented on pursuant to Sec. 264, Para. 3 and Sec. 264b of the German Commercial Code (HGB): pages 220 et seqq. of the Notes. (32) Auditors' fees • BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, Essen • GBV Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen The fees for audit services primarily contain the fees for the audit of the consolidated • Kernkraftwerk Lingen Gesellschaft mit beschränkter Haftung, Lingen (Ems) financial statements and for the audit of the financial statements of RWE AG and its subsidia- • KMG Kernbrennstoff-Management Gesellschaft mit beschränkter Haftung, Essen ries, along with the review of the interim statements. Other assurance services mainly • Nordsee Windpark Beteiligungs GmbH, Essen include fees for reviews related to statutory or court-ordered requirements. In particular, • Rheinbraun Brennstoff GmbH, Cologne the fees for tax services include compensation for consultation in the preparation of tax • Rheinische Baustoffwerke GmbH, Bergheim returns and other national and international tax-related matters as well as review of • RV Rheinbraun Handel und Dienstleistungen GmbH, Cologne resolutions of the tax authorities. Other services include compensation for consultation • RWE Battery Solutions GmbH, Essen related to M&A activity. • RWE Generation Service GmbH, Essen • RWE Renewables Beteiligungs GmbH, Dortmund RWE recognised the following fees as expenses for the services rendered by the auditors of • RWE Renewables Offshore HoldCo One GmbH, Essen the consolidated financial statements, PricewaterhouseCoopers GmbH Wirtschaftsprü- • RWE Renewables Offshore HoldCo Three GmbH, Essen fungsgesellschaft (PwC) and companies belonging to PwC’s international network: • RWE Renewables Offshore HoldCo Two GmbH, Essen PwC network fees 2021 2020 • RWE Trading Services GmbH, Essen • RWE Technology International GmbH, Essen € million Audit services Other assurance services Tax services Other services 1 Restated prior-year figure. Total 12.5 0.5 0.3 0.7 14.0 Of which: Germany 6.8 0.4 0.3 0.7 8.2 Total 10.7 1.2 0.31 2.5 14.71 Of which: Germany 5.8 1.0 0.2 2.5 9.5 (34) Events after the balance-sheet date In the period from 1 January 2022 until the completion of the consolidated financial statements on 3 March 2022, the following significant events occurred: RWE enters US offshore wind market. At the end of February 2022, we were successful in an auction of seabed leases for offshore wind sites in the New York Bight. A joint venture bet- ween RWE and National Grid Ventures secured an area for US$1.1 billion, on which about 3 GW of generation capacity can be built, which would be capable of producing enough electricity to serve 1.1 million US homes. The auction included six lease sites, with bidders being allowed to secure one each. Every successful bid conferred the right to develop a site and participate in upcoming auctions of the conditions for purchasing the electricity in the 181 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Notes 5 Further information states of New York and New Jersey. If the project progresses as planned, our offshore wind Huge uncertainty after Russian attack on Ukraine. Russian troops marched into Ukraine farm in the New York Bight will be commissioned during this decade. at the end of February. This constitutes an invasion under international law, prompting outrage and consternation around the globe. Many countries including the USA, EU Wind joint venture with Northland Power launched. In January 2022, RWE and Northland member states and the United Kingdom imposed economic sanctions on Russia. Uncer- Power initiated a joint venture for the development of wind energy projects in the German tainty concerning commodity deliveries from Russia to Europe has caused a significant North Sea. We expect this cooperation to deliver substantial synergies, resulting in cost increase in gas and electricity trading quotations. In some European countries, including savings in the development, construction and operation of the assets. RWE owns 51 % and Germany, governments are working on measures to reduce dependency on Russian oil and our Canadian partner owns 49 % of the joint venture, which encompasses three offshore gas imports. When the consolidated financial statements were prepared in early March wind projects aiming to develop a total capacity of 1.3 GW. The sites of the future wind 2022, it was impossible to predict the development of the Ukraine conflict or its consequen- farms are located north of the Island of Juist. Before forging the joint venture, we had ces. Although RWE does not have business activities in Russia or Ukraine, further escalation co-operated with Northland Power on two of the three projects. One project is focussed on a of the conflict and discontinuation of supply relationships with Russian companies could 433 MW wind farm on a site officially called N-3.8, which we secured via a step-in right have notable effects on our assets, liabilities, financial position and profit or loss. It is following an invitation to tender in 2021 (see page 41). The other initiative was dedicated to possible, for example, that Russian commodity suppliers will no longer be able to meet their the construction and operation of a 420 MW wind farm, which we hope to build on the obligations and that we will have to purchase commodities at high prices on the market. It N-3.5 site. We also have a step-in right for this area, but have not exercised it yet. RWE cannot be ruled out that contractual partners may become insolvent due to sanctions. initially only held a 15 % share of both ventures and had originally developed the third joint Additionally, changes in security prices due to a stock market crisis resulting from the venture project alone. It is centred around a 480 MW wind farm at the N-3.6 site, for which Ukraine conflict may have a significant impact on RWE’s financial assets and those of our we also hold a step-in right which has not been made use of to date. The auctions for the pension funds. More detailed information can be found in the chapter entitled ‘Development sites N-3.5 and N-3.6 should be held in 2023. In the event that other companies are of risks and opportunities’, which starts on page 70. successful, we can exercise our step-in rights. RWE once again successful in British capacity market auctions. The British capacity market held another auction on 22 February, relating to the delivery period from 1 October 2025 to 30 September 2026. We secured a payment for all participating RWE power stations, including two small new-builds. Altogether, these assets have a secured capacity of 6,647 MW. At £30.59 / kW per annum (plus inflation adjustment), the capacity payment established in the bidding procedure was the highest such figure since the capacity market auctions started in 2014. A total of 42.4 GW in generation capacity qualified for a capacity payment at the auction. During the delivery period, they will receive remuneration for being online and contributing to electricity supply. 182 RWE Annual Report 2021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 AG. Essen, 3 March 2022 The Executive Board Krebber Müller Seeger 1 www.rwe.com/statement-of-compliance-2021 183 RWE Annual Report 2021 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 2021 I. Affiliated companies which are included in the consolidated financial statements Shareholding in % Equity Net income / loss Direct Total Aktivabedrijf Wind Nederland B.V., Geertruidenberg/Netherlands Alte Haase Bergwerks-Verwaltungs-Gesellschaft mbH, Dortmund Amrum-Offshore West GmbH, Essen 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 Baltic Trade and Invest Sp. z o.o., Słupsk/Poland Belectric Canada Solar Inc., Vancouver/Canada Belectric Photovoltaic India Private Limited, Mumbai/India BELECTRIC Solar Power, S.L. en liquidación, Barcelona/Spain BGE Beteiligungs-Gesellschaft für Energieunternehmen mbH, Essen 100 Big Star Solar, LLC, Wilmington/USA 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 Bright Arrow 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. 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 184 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 – 7,452 – 69,129 2,632 24,339 58,538 124,124 10,651 – 520 16,821 550 1,824 390 201 0 4,255 0 113,656 113,669 0 € ’000 – 18,208 – 2,441 86,150 229 – 80 1,248 2,229 – 34 – 738 535 949 337 1 0 75 0 – 264 – 11,014 0 RWE Annual Report 2021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 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 Conrad Solar Inc., Vancouver/Canada DOTTO MORCONE S.r.l., Rome/Italy Dromadda Beg Wind Farm Limited, Kilkenny/Ireland Edgware Energy Limited, Swindon/United Kingdom El Algodon Alto Wind Farm, LLC, Wilmington/USA Electra Insurance Limited, Hamilton/Bermudas Energy Resources Holding B.V., Geertruidenberg/Netherlands Energy Resources Ventures B.V., Geertruidenberg/Netherlands Extension Du Parc Eolien De L'Epine Marie Madeleine SAS, Clichy/France Extension Du Parc Eolien Du Douiche SAS, Clichy/France Farma Wiatrowa Barzowice Sp. z o.o., Warsaw/Poland 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 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 87,793 € ’000 – 442 214,346 – 10,228 463 – 4,856 173,678 172,739 253,679 14,469 14,469 152 68,609 223,316 0 4,351 2,806 374 – 437 26,288 99,656 17,416 – 39 7 30,179 – 151 – 229 – 76 – 980 – 24,138 – 87,805 – 87,805 114 – 446 – 9,802 0 4,189 688 231 – 419 – 724 – 13,461 – 1,292 – 41 – 3 1,399 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 185 RWE Annual Report 2021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 Farma Wiatrowa Rozdrazew 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 Castellano Manchega, S.L., Murcia/Spain Generación Fotovoltaica De Alarcos, S.L.U., Barcelona/Spain Generación Fotovoltaica Puerta del Sol, S.L.U., Murcia/Spain GfV Gesellschaft für Vermögensverwaltung mbH, Dortmund 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 Kernkraftwerk Lingen Gesellschaft mit beschränkter Haftung, Lingen (Ems) Kernkraftwerke Lippe-Ems Gesellschaft mit beschränkter Haftung, Lingen (Ems) KMG Kernbrennstoff-Management Gesellschaft mit beschränkter Haftung, Essen Direct Total 100 100 100 100 100 100 51 100 51 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 € ’000 – 414 102 14,565 14,565 6,997 8,209 10,868 17,585,771 – 21 656 67 € ’000 – 7 – 7 – 63,829 – 63,829 855 1,303 1,640 1 – 56 579 – 17 126,158 – 7,685 92,929 69,851 164,320 162,302 253,464 5 – 9,065 40,947 20,034 432,269 696,225 – 786 6,325 – 179 – 2,076 – 10,029 19 – 6,255 17,047 1 1 1 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. 186 RWE Annual Report 2021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 Knabs Ridge Wind Farm Limited, Swindon/United Kingdom Las Vaguadas I Fotovoltaica S.L., Barcelona/Spain Limondale Sun Farm Pty. Ltd., Melbourne/Australia Little Cheyne Court Wind Farm Limited, Swindon/United Kingdom MI-FONDS G50, Frankfurt am Main ML Wind LLP, Swindon/United Kingdom Munnsville Investco, LLC, Wilmington/USA Munnsville WF Holdco, LLC, Wilmington/USA Munnsville Wind Farm, LLC, Wilmington/USA Nordsee Windpark Beteiligungs GmbH, Essen Panther Creek Holdco, LLC, Wilmington/USA Panther Creek Three Class B, LLC, Wilmington/USA Panther Creek Three Holdco, LLC, Wilmington/USA Panther Creek Wind Farm I&II, LLC, Wilmington/USA Panther Creek Wind Farm Three, LLC, Wilmington/USA Parc Eolien D'Allerey SAS, Clichy/France Parc Eolien De Catillon-Fumechon SAS, Clichy/France Parc Eolien De La Brie Nangissienne SAS, Clichy/France Parc Eolien De La Butte Aux Chiens SAS, Clichy/France Parc Eolien De La Voie Corette SAS, Clichy/France Parc Eolien De Luçay-Le-Libre Et De Giroux SAS, Clichy/France Parc Eolien De Martinpuich SAS, Clichy/France Parc Eolien Des Grands Lazards SAS, Clichy/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. Direct Total 100 100 100 100 59 100 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 13,870 32 3,477 32,823 77,784 70,121 14,165 766 766 15,318 202,899 220,448 220,448 317,329 70,889 – 118 26 23 27 – 94 20 – 15 26 € ’000 1,129 – 123 – 18,722 7,140 – 243 8,144 – 28 – 34,996 – 34,996 1 0 0 0 – 9,962 – 17,391 – 96 – 2 – 4 – 2 – 36 – 4 – 20 – 2 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 187 RWE Annual Report 2021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 Parc Eolien Des Hauts-Bouleaux SAS, Clichy/France Parc Eolien Des Nouvions SAS, Clichy/France Parc Eolien Du Balinot SAS, Clichy/France Parc Eolien Du Ban Saint-Jean SAS, Clichy/France Parc Eolien Du Catesis SAS, Clichy/France Parc Eolien Du Chemin De Chálons SAS, Clichy/France Parc Eolien Du Chemin De Saint-Gilles SAS, Clichy/France Parc Eolien Du Mirebalais SAS, Clichy/France Parc Eolien Du Moulin Du Bocage SAS, Clichy/France Parc Eolien Les Pierrots SAS, Clichy/France 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 Rampion Offshore Wind Limited, Coventry/United Kingdom Rampion Renewables Limited, Coventry/United Kingdom Renewables Solar Holding 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. Direct Total 100 100 100 100 100 100 100 100 100 60 100 100 100 100 51 100 100 100 100 100 50 100 100 € ’000 – 113 – 164 26 25 – 27 5 – 14 26 26 – 633 224 59 – 51 179,821 21,525 153,861 0 80,726 126,858 409,862 1,251,676 1,038,964 43,839 € ’000 – 37 – 61 – 2 – 2 – 25 – 4 – 9 – 2 – 2 – 302 – 300 – 616 13,277 – 2,580 3,062 3,253 – 331 14,416 – 516 – 19,884 129,641 390,537 38,816 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 188 RWE Annual Report 2021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 Rheinbraun Brennstoff GmbH, Cologne Rheinische Baustoffwerke GmbH, Bergheim Rheinkraftwerk Albbruck-Dogern Aktiengesellschaft, Waldshut-Tiengen 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., Geertruidenberg/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 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 77 100 50 100 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 82,619 9,236 32,103 60,708 127,978 1,711 1,711 36,694 97,561 € ’000 1 1 1,757 1,327 13,150 – 150,971 – 150,971 1 – 1,220 8,359,158 1,108,098 1,180 25 226 4,635 1 1 1 – 596 – 953,590 – 450,075 117,729 11,227 856 25 347,075 350,087 – 56,300 25 – 44 1 26,423 1 39,100 1 – 550,990 – 296,475 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 189 RWE Annual Report 2021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 Generation NL Personeel B.V., Geertruidenberg/Netherlands RWE Generation SE, Essen RWE Generation Service GmbH, Essen RWE Generation UK Holdings Limited, Swindon/United Kingdom RWE Generation UK plc, Swindon/United Kingdom RWE Hörup Windparkbetriebsgesellschaft mbH, Hörup RWE indeland Windpark Eschweiler GmbH & Co. KG, Eschweiler 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 KL 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 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 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 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 15,327 270,659 25 3,066,711 1,632,056 26 45,822 398,948 568,737 1,598,287 1,811 € ’000 1,106 8,850 1 1 198,692 27,517 1 4,385 10,568 11,076 – 6,916 1 – 43,501 – 17,927 25 8,386 25 74,464 94,357 578 1 – 31,305 1 2,854 – 3,235 1 137,286 37,286 1 – 338 – 14 – 387 – 5 2,109,457 72,248 1 1,608,434 – 154,642 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 190 RWE Annual Report 2021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 Asset Management, LLC, Wilmington/USA RWE Renewables Australia Pty. Ltd., Melbourne/Australia RWE Renewables Benelux B.V., Geertruidenberg/Netherlands RWE Renewables Beteiligungs GmbH, Dortmund RWE Renewables Canada Holdings Inc., Vancouver/Canada RWE Renewables Denmark A/S, Rødby/Denmark 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 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 100 100 100 100 100 100 100 100 100 100 100 100 100 100 99 95 100 60 100 100 100 100 € ’000 281,468 269 € ’000 2,937 289 – 44,190 – 1,708 8,950 – 1,266 1,342 1 209 1,241 791,489 – 14,998 – 5 57,600 1,109 – 8,666 – 8,667 – 25,993 270,757 162,287 – 5 – 377,113 1 4,215 4,215 10,379 0 11,322 2 350,070 – 8,536 393,034 244,043 – 2,645 – 1,418 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 191 RWE Annual Report 2021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 Japan G.K., Tokyo/Japan RWE Renewables Management UK Limited, Swindon/United Kingdom RWE Renewables Offshore HoldCo One GmbH, Essen RWE Renewables Offshore HoldCo Three GmbH, Essen RWE Renewables Offshore HoldCo Two GmbH, Essen RWE Renewables O&M, LLC, Wilmington/USA RWE Renewables Operations Australia Pty Ltd, Melbourne/Australia RWE Renewables Poland Sp. z o.o., Warsaw/Poland RWE Renewables QSE, LLC, Wilmington/USA RWE Renewables Services, LLC, Wilmington/USA RWE Renewables Sweden AB, Malmö/Sweden RWE Renewables UK Blyth Limited, Coventry/United Kingdom RWE Renewables UK Dogger Bank South One Limited, Swindon/United Kingdom RWE Renewables UK Dogger Bank South Two Limited, Swindon/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 Onshore 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 Scroby Sands Limited, Coventry/United Kingdom Direct Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 € ’000 9,024 120,181 25 25 25 19,543 1,558 412,146 – 4,754 407,654 58,576 1,325 – 985 – 985 1,866,890 596,843 549,041 170,757 95,315 59,702 102,060 86,281 64,593 € ’000 – 3,360 1,572 1 1 1 10,795 710 23,210 20 – 46,240 4,638 700 – 964 – 964 128,297 59,989 593 50,398 20,690 19,238 23,490 12,689 6,179 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. 192 RWE Annual Report 2021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 UK Swindon Limited, Swindon/United Kingdom RWE Renewables UK Wind Services Limited, Coventry/United Kingdom RWE Renewables UK Zone Six Limited, Coventry/United Kingdom RWE Renouvelables France SAS, Clichy/France RWE Solar Development, LLC, Wilmington/USA RWE Solar NC Lessee LLC, Wilmington/USA RWE Solar NC Pledgor LLC, Wilmington/USA RWE Solar Netherlands B.V., Geertruidenberg/Netherlands RWE Solar PV, LLC, Wilmington/USA RWE Sommerland Windparkbetriebsgesellschaft mbH, Sommerland RWE Süderdeich Windparkbetriebsgesellschaft mbH, Süderdeich 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 Japan KK, Tokyo/Japan 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 Services GmbH, Essen RWE Wind Karehamn AB, Malmö/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. Direct Total € ’000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2,366,891 39,212 0 111,747 269,466 14,396 2,516 – 238 64,885 26 106 47,311 255,599 446,778 6,483 14,557 11,108 15,788 42 2,521 25 5,735 33,670 100 € ’000 84,707 13,152 0 – 5,872 – 15,214 – 393 0 – 238 – 6,258 1 1 17,311 – 8,131 1 – 937 46 – 1,677 3,861 1 6 375 1 1 75 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 193 RWE Annual Report 2021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 Wind Onshore Deutschland GmbH, Hanover RWE Wind Services Denmark A/S, Rødby/Denmark RWE Windpark Bedburg A44n GmbH & Co. KG, Bedburg RWE Windpark Bedburg GmbH & Co. KG, Bedburg RWE Windpark Garzweiler GmbH & Co. KG, Essen RWE Windpower Netherlands B.V., Geertruidenberg/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 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 Solarengo Portugal, SGPS, Unipessoal Lda., Cascais/Portugal SRS EcoTherm GmbH, Salzbergen 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 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 51 51 51 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 100 100 100 € ’000 80,111 8,941 12,086 59,713 33,301 8,271 11,894 – 2,040 – 4,781 20,028 0 – 433 5,924 13 – 369 9,709 21,497 8,699 4,655 8,115 7,554 13,090 731 € ’000 1 5,207 – 66 7,721 889 3,511 5,540 – 8,442 – 2,628 – 143,866 0 – 17 – 2 – 2 – 218 – 14 4,304 – 1,297 – 4,319 128 84 45 162 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 2021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 Triton Knoll HoldCo Limited, Swindon/United Kingdom Triton Knoll Offshore Wind Farm Limited, Swindon/United Kingdom Valencia Solar, LLC, Tucson/USA West of the Pecos Holdco, LLC, Wilmington/USA West of the Pecos Solar, LLC, Wilmington/USA Wind Farm Deliceto s.r.l., Bolzano/Italy Windpark Eekerpolder B.V., Geertruidenberg/Netherlands Windpark Kattenberg B.V., Geertruidenberg/Netherlands Windpark Nordsee Ost GmbH, Heligoland Windpark Oostpolderdijk B.V., Geertruidenberg/Netherlands Windpark Zuidwester B.V., Geertruidenberg/Netherlands WKN Windkraft Nord GmbH & Co. Windpark Wönkhausen KG, Hanover Direct Total 59 100 100 100 100 100 100 100 100 100 100 100 € ’000 98,705 – 150,791 10,623 65,527 109,492 25,525 1,824 1,155 256 – 47 8,164 2,977 € ’000 0 666 1,045 – 7 – 339 1,767 2,021 390 1 – 17 – 584 779 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. 195 RWE Annual Report 2021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 Agenzia Carboni S.r.l., Genoa/Italy Alcamo II S.r.l., Milan/Italy Alvarado Solar S.L., Barcelona/Spain Anemos Ala Segarra, S.L., Reus/Spain Ashwood Solar I, LLC, Wilmington/USA Auzoberri Desarrollo, S.L.U., Barasoain/Spain Azagra Energy Quel, S.L.U., Barasoain/Spain Baron Winds II LLC, Chicago/USA Baron Winds LLC, Chicago/USA Belectric Inversiones Latinoamericana S.L., Barcelona/Spain BELECTRIC JV GmbH, Kolitzheim Belectric Mexico Fotovoltaica S.de R.L. de C.V., Bosques de las Lomas/Mexico Blackbeard Solar, LLC, Wilmington/USA Blackbriar Battery, LLC, Wilmington/USA Blueberry Hills LLC, Chicago/USA BO Baltic Offshore GmbH, Hamburg Bowler Flats Energy Hub LLC, Chicago/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 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 98 100 100 100 100 100 100 100 224 – 4 4 3 0 233 382 0 0 115 53 – 26 0 0 0 6 0 0 0 573 – 11 0 0 17 – 29 – 11 0 0 – 1 – 2 0 0 – 9 2 – 20 0 0 0 – 2 0 0 0 0 – 13 0 0 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 196 RWE Annual Report 2021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 Camster II Wind Farm Limited, Swindon/United Kingdom 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 Clavellinas Solar, S.L., Barcelona/Spain Clinton Wind, LLC, Wilmington/USA 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 Dohema Offshore sp. z o.o., Główczyce/Poland E & Z Industrie-Lösungen GmbH, Essen Eko-En 1 Sp. z o.o., Warsaw/Poland Eko-En 2 Sp. z o.o., Warsaw/Poland Direct Total € ’000 € ’000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 70 100 100 100 100 100 0 – 11 – 11 0 0 0 – 11 – 11 – 11 0 5 0 – 11 0 – 12 – 11 – 1,036 2,715 12 16,975 12 47 3 0 – 13 – 13 0 0 0 – 13 – 13 – 13 0 – 9 0 – 12 0 – 13 – 13 – 393 424 – 2 – 1,099 – 12 – 33 100 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. 197 RWE Annual Report 2021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 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 Emisja Zero Sp. z o.o., Zielona Góra/Poland Enchant Solar 4 Inc., Vancouver/Canada Eólica Alta Anoia, S.L., Reus/Spain Eólica La Conca, S.L., Reus/Spain Eólica La Conca 2, S.L., Reus/Spain Eólica La Conca 3, S.L., Reus/Spain 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 Des Nouvions SAS, Clichy/France 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 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. 198 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 422 401 – 4 1 4 0 3 3 3 3 0 0 0 0 27 0 0 0 0 0 – 78 – 107 25 – 22 – 13 – 8 – 5 – 2 0 0 0 0 0 0 0 0 0 – 2 0 0 0 0 0 – 119 – 118 1 RWE Annual Report 2021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 GBV Dreiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Einunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, Essen GBV Siebte Gesellschaft für Beteiligungsverwaltung mbH, Essen Geun Heung Offshore Wind Power Co., Ltd., Seoul/South Korea Direct 100 100 Goldcup 29644 AB, Sundsvall/Sweden Goldcup 29645 AB, Sundsvall/Sweden Goldcup 29646 AB, Sundsvall/Sweden 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 Greenswitch Wind, LLC, Wilmington/USA Haube Wind Sp. z o.o., Słupsk/Poland Hickory Park Class B, LLC, Wilmington/USA Hickory Park Holdco, LLC, Wilmington/USA 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 Janus Solar PV, 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. 199 Total € ’000 € ’000 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 100 25 30 100 0 0 0 38 1 1 1 3 3 3 3 0 0 0 1 3 191 – 1,502 3 3 0 0 0 82 0 – 28 – 247 0 0 0 62 89 428 60 10,133 0 RWE Annual Report 2021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 Jerez Fotovoltaica S.L., Barcelona/Spain Jugondo Desarrollo, S.L.U., Barasoain/Spain Kieswerk Kaarst GmbH & Co. KG, Bergheim Kieswerk Kaarst Verwaltungs GmbH, Bergheim La Casa Wind, LLC, Wilmington/USA Lake Fork Wind Farm, LLC, Wilmington/USA Lampasas Wind LLC, Chicago/USA Las Vaguadas II Solar S.L., Barcelona/Spain Lumbier Energy Judas, S.L.U., Barasoain/Spain Mahanoy Mountain, LLC, Chicago/USA Major Wind Farm, LLC, Wilmington/USA March Road Solar, LLC, Wilmington/USA Maricopa East Solar PV, LLC, Wilmington/USA Maricopa East Solar PV 2, LLC, Wilmington/USA Maricopa Land Holding, LLC, Wilmington/USA Maricopa West Solar PV 2, LLC, Wilmington/USA Maryland Sunlight 1 LLC, Wilmington/USA Mason Dixon Wind LLC, Chicago/USA Morska Farma Wiatrowa Antares sp. z o.o., Warsaw/Poland Mud Springs Wind Project LLC, Chicago/USA Muñegre Desarrollo, S.L.U., Barasoain/Spain Northern Orchard Solar PV, LLC, Wilmington/USA Northern Orchard Solar PV 2, 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. 200 Total 100 100 51 51 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 € ’000 8 1,185 3,454 31 0 0 6 358 0 0 0 0 0 0 0 0 0 50 0 202 0 0 € ’000 – 8 – 2 1,254 0 3 0 0 – 7 – 2 0 0 0 0 0 0 0 0 0 – 33 0 – 1 0 0 RWE Annual Report 2021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 Northern Orchard Solar PV 3, LLC, Wilmington/USA Nouvions Poste de Raccordement SAS, Clichy/France Oddeheia Wind DA, Oslo/Norway Offshore-Windpark Delta Nordsee GmbH, Hamburg Ohio Sunlight 1 LLC, Wilmington/USA Olmunite Investments sp. z o.o., Główczyce/Poland Oranje Wind Power B.V., Geertruidenberg/Netherlands Oranje Wind Power C.V., Geertruidenberg/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 De Beg Ar C'hra SAS, Clichy/France Parc Eolien De Canny SAS, Clichy/France Parc Eolien de Dissay-sous-Courcillon SAS, Clichy/France Parc Eolien De Foissy-Sur-Vanne SAS, Clichy/France Parc Eolien de Froidmont-cohartille SAS, Clichy/France Parc Eolien De Ganochaud SAS, Clichy/France Parc Eolien De La Cabane Blanche SAS, Clichy/France Parc Eolien De La Croix Blanche SAS, Clichy/France Parc Eolien De La Jarrie-Audouin SAS, Clichy/France Parc Eolien De La Plaine De Beaulieu SAS, Clichy/France Parc Eolien de la Vallée de l’Eaulne SAS, Clichy/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. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 – 4 493 0 – 2 0 0 209 0 0 0 26 33 33 20 22 27 33 33 35 0 – 2 3 1 0 – 3 0 0 – 4 0 0 0 – 2 – 2 3 – 2 3 – 3 – 3 – 2 – 2 – 2 – 2 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 2021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 Langeron SAS, Clichy/France Parc Eolien de Langonnet SAS, Clichy/France Parc Eolien De L'Avre SAS, Clichy/France Parc Eolien De Mesbrecourt-Richecourt SAS, Clichy/France Parc Eolien de Morley SAS, Clichy/France Parc Eolien De Nuisement Et Cheniers SAS, Clichy/France Parc Eolien De Soudron SAS, Clichy/France Parc Eolien de Viam SAS, Clichy/France Parc Eolien De Villeneuve Minervois SAS, Clichy/France Parc Eolien Des Ailes Du Gótinâis SAS, Clichy/France Parc Eolien des Baumes SAS, Clichy/France Parc Eolien des Cinq Poiriers SAS, Clichy/France Parc Eolien des Milles Vents SAS, Clichy/France Parc Eolien Des Raisinières SAS, Clichy/France Parc Eolien D’Ormesnil SAS, Clichy/France Parc Eolien Du Bocage SAS, Clichy/France Parc Eolien Du Champ Madame SAS, Clichy/France Parc Eolien Du Chemin Vert SAS, Clichy/France Parc Eolien Du Mont Hellet SAS, Clichy/France Parc Eolien Du Mont Herbé SAS, Clichy/France Parc Eolien Du Moulin De Thiau SAS, Clichy/France Parc Eolien Du Plateau De La Chapelle-Surchésy SAS, Clichy/France Parc Eolien Du Ru Garnier SAS, Clichy/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. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 21 23 33 33 33 33 33 35 35 35 33 33 – 3 3 – 2 – 2 3 – 2 – 2 3 – 2 – 2 – 2 – 2 – 2 – 2 – 2 – 91 – 14 33 33 33 26 26 33 27 – 2 – 2 – 2 – 2 – 3 – 2 – 2 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 2021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 106 SAS, Clichy/France Parc Eolien 107 SAS, Clichy/France Parc Eolien 108 SAS, Clichy/France Parc Eolien 111 SAS, Clichy/France Parc Eolien 112 SAS, Clichy/France Parc Eolien 113 SAS, Clichy/France Parc Eolien 114 SAS, Clichy/France Parc Eolien 115 SAS, Clichy/France Parc Solaire de Canny SAS, Clichy/France Parc Solaire de Gannat SAS, Clichy/France Parc Solaire de l'Echineau SAS, Clichy/France Parc Solaire de Pimorin SAS, Clichy/France Parc Solaire de Vernusse SAS, Clichy/France Parc Solaire des Pierrieres SAS, Clichy/France Parc Solaire du Ban Saint Jean SAS, Clichy/France Parc Ynni Cymunedol Alwen Cyfyngedig, Swindon/United Kingdom Parque Eólico El Ópalo, S. de R.L. de C.V., Ciudad de México/Mexico Pawnee Spirit Wind Farm, LLC, Wilmington/USA Paz 'Éole SAS, Clichy/France Pe Ell North LLC, Chicago/USA 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 35 35 35 35 35 35 0 0 26 0 46,563 45,834 0 – 2 – 2 – 2 3 3 3 3 3 3 3 – 2 – 2 3 – 2 3 0 3 0 – 2 0 – 5 – 285 0 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 2021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 Prairie Creek Wind, 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 R-Gen Renewables Limited, Altrincham/United Kingdom Ribaforada Energy Ribaforada, S.L.U., Barasoain/Spain Roadrunner Crossing Wind Farm, LLC, Wilmington/USA Rose Rock Wind Farm, LLC, Wilmington/USA Rouget Road Solar Farm, LLC, Lake Mary/USA RWE & Turcas Dogalgaz Ithalat ve Ihracat A.S., Istanbul/Turkey RWE AUSTRALIA PTY LTD, Brisbane/Australia RWE Belgium BV, Brussels/Belgium RWE Carbon Sourcing North America, 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 0 0 0 22 26 20 21 21 0 0 0 0 3 – 5 – 12 – 5 – 5 – 5 0 1,441 – 157 3 0 212 0 0 535 58 1,388 0 3 – 5 1 3 – 2 0 0 3 175 14 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 2021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 RWE Dhabi Union Energy LLC, Abu Dhabi/United Arab Emirates RWE Dils Energie NV, Hasselt/Belgium 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 Development, LLC, Wilmington/USA RWE Offshore Wind A/S, Rødby/Denmark RWE Offshore Wind GmbH, Essen 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 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 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. 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 36 0 0 – 99 2,118 10,985 2 60 2,660 51 25 – 106 0 0 0 0 3,950 84 6,759 – 319 7,108 0 0 0 – 1,918 250 – 4 235 6 36 – 27 3 3 1 – 1,065 0 0 0 0 78 – 215 943 – 823 – 2,036 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 205 RWE Annual Report 2021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 RWE Renewables Deutschland GmbH, Schönefeld RWE Renewables France SAS, Levallois-Perret/France RWE Renewables Hellas Single Member S.A., Athens/Greece RWE Renewables Japan Holdings K.K., Tokyo/Japan RWE Renewables Korea LLC, Seoul/South Korea RWE Renewables Land, LLC, Wilmington/USA RWE Renewables Mexico, S. de R.L. de C.V., Ciudad de México/Mexico RWE Renewables Offshore Development One GmbH, Essen RWE Renewables Offshore Development Two GmbH, Essen RWE Renewables Offshore HoldCo Four GmbH, Essen RWE Renewables Services GmbH, Essen RWE Renewables Services Mexico, S. de R.L. de C.V., Ciudad de México/Mexico RWE Renewables Taiwan Ltd., Taipei City/Taiwan RWE Renewables Trident Offshore GmbH, Essen RWE Renewables UK Spareco Limited, Swindon/United Kingdom RWE Slovak Holding B.V., Geertruidenberg/Netherlands RWE Solar Poland Sp. z o.o., Warsaw/Poland RWE Stallingborough Limited, Swindon/United Kingdom RWE Supply & Trading (India) Private Limited, Mumbai/India 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 THOR 1 B.V., Geertruidenberg/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. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 206 € ’000 25 4,045 948 € ’000 1 – 437 3 3 – 76 3 – 357 – 1,572 3 3 3 – 377 – 297 – 6 3 0 158 – 514 0 55 36 1 – 1 3 25 226 153 0 242 – 654 0 927 542 25 94 RWE Annual Report 2021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 RWE THOR 2 B.V., Geertruidenberg/Netherlands RWE THOR 3 B.V., Geertruidenberg/Netherlands RWE THOR 4 B.V., Geertruidenberg/Netherlands RWE Trading Americas Inc., New York City/USA 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 Norway AS, Oslo/Norway RWE Wind Transmission AB, Malmö/Sweden RWE Windpark Bedburg A44n Verwaltungs GmbH, Bedburg RWE Windpark Bedburg Verwaltungs GmbH, Bedburg RWE Windpark Garzweiler Verwaltungs GmbH, Essen RWE Windpark Papenhagen GmbH & Co. KG, Hanover RWE Windpark Papenhagen Verwaltungs GmbH, Hanover RWE Windparks Deutschland GmbH, Essen RWEST NA Investments GmbH, Essen RWEST PARTICIPAÇÕES, Rio de Janeiro/Brazil RWEST PI Bras Limited, London/United Kingdom RWEST PI FRE Holding LLC, New York City/USA SB Retrofit, LLC, Dallas/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. 207 100 100 100 100 100 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 3 3 3 – 6,947 35 – 31 3 – 14 0 – 8 – 124 – 6 3 1 – 4 – 12 4 1 – 40,761 3 3,010 1,438 167 5,596 5 243 40 694 28 48 23 564 38 24 77 23,818 – 1,837 2 – 11 3 RWE Annual Report 2021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 Scioto Solar LLC, Wilmington/USA Seohae Offshore Wind Power Co., Ltd., Taean-gun/South Korea Sergenite Investments sp. z o.o., Główczyce/Poland Servanin Sp. z o.o., Warsaw/Poland Sharco Wind sp. z o.o., Główczyce/Poland Shay Solar, LLC, Wilmington/USA Snow Shoe Wind Farm, LLC, Wilmington/USA Solar PV Construction Poland sp. z.o.o., Warsaw/Poland Sparta North, LLC, Wilmington/USA Sparta South, LLC, Wilmington/USA Stillwater Energy Storage, LLC, Wilmington/USA Storage Facility 1 Ltd., Slough/United Kingdom Sun Data GmbH (i.L.), Kolitzheim Sunrise Energy Generation Pvt. Ltd., Mumbai/India Sunrise Wind Holdings, LLC, Chicago/USA Tafalla Energy Tafalla, S.L.U., Barasoain/Spain TE Portfolio Financing One, LLC, Wilmington/USA 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 Tika Solar, S. de R.L. de C.V., Ciudad de México/Mexico Tipton Wind, 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. 208 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 – 2 0 0 0 0 3 – 3 3 – 2 0 0 – 135 – 41 0 0 0 – 75 60 77 0 212 0 0 0 0 0 0 0 – 33 – 7 3 0 – 2 3 0 3 0 0 3 0 RWE Annual Report 2021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 Valverde Wind Farm, LLC, Wilmington/USA VDE Komplementär GmbH, Hanover 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 Vindkraftpark Brynhild AB, Uppsala/Sweden Vortex Energy Deutschland GmbH, Kassel Vortex Energy Windpark GmbH & Co. KG, Hanover VSL Primus Sp. z o.o., Warsaw/Poland Walker Road Solar Farm, LLC, Lake Mary/USA 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 Winterlingen-Alb GmbH & Co. KG, Hanover WIT Ranch Wind Farm, LLC, Wilmington/USA WR Graceland Solar, LLC, Wilmington/USA Zielone Glówczyce Sp. z o.o., Główczyce/Poland 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. 209 100 100 100 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 13 0 665 0 0 0 1,185 606 3,300 4,397 4,900 0 0 0 0 0 0 – 17 0 31 0 0 0 – 2 – 135 3 – 265 – 2,177 0 3 0 0 0 0 3,350 – 503 0 0 0 0 4,192 – 277 RWE Annual Report 2021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 III. Joint operations Greater Gabbard Offshore Winds Limited, Reading/United Kingdom N.V. Elektriciteits-Produktiemaatschappij Zuid-Nederland EPZ, Borssele/Netherlands IV. Affiliated companies of joint operations Enzee B.V., Borssele/Netherlands V. Associated companies of joint operations B.V. NEA, Arnhem/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. Shareholding in % Equity Net income / loss Direct Total 50 30 € ’000 1,090,232 93,082 € ’000 102,399 10,335 Shareholding in % Equity Net income / loss Direct Total 100 € ’000 506 € ’000 406 Shareholding in % Equity Net income / loss Direct Total 29 € ’000 74,611 € ’000 1,512 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 210 RWE Annual Report 2021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 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 Awel y Môr Offshore Wind Farm Limited, Swindon/United Kingdom C-Power N.V., Ostend/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 Meton Energy S.A., Athens/Greece RWE Venture Capital GmbH, Essen 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 60 4 27 50 25 50 50 514 75 4 40 50 50 € ’000 31,598 € ’000 1,779 1,073,377 138,320 14,871 286,106 140,100 – 30,155 252,278 – 3,679 432 17,212 33,535 70,416 – 473 29,287 – 10,341 46,189 – 19,610 – 457 3 – 410 4,697 2 2,112 2 147,383 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 211 RWE Annual Report 2021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 Belectric Gulf Limited, Abu Dhabi/United Arab Emirates 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 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 RWE Renewables Technology Fund I GmbH & Co. KG, Dortmund Schluchseewerk Aktiengesellschaft, Laufenburg (Baden) Vela Wind Holdco, LLC, Wilmington/USA 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 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 212 Total € ’000 2,466,400 2,655 – 107 34,574 33,248 140,729 969,918 969,067 – 128 € ’000 216,600 – 5,518 – 9 – 17,351 11,0972 6,647 109,841 2 110,063 2 – 9 276,350 – 14,337 4,881 47,706 1,791,179 131,320 14,619 70,575 149,560 5,395 4,212 – 7,188 143,505 18,235 945 2,809 0 – 478 25 49 50 26 28 40 49 13 5 50 20 40 20 106 20 784 50 25 754 RWE Annual Report 2021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 Akita Yurihonjo Yojou Wind Energy K.K., Yurihonjo/Japan Alfred Thiel-Gedächtnis-Unterstützungskasse GmbH, Essen Ascent Energy LLC, Wilmington/USA Bight Wind Holdings, LLC, Wilmington/USA CARBON Climate Protection GmbH, Langenlois/Austria CARBON Egypt Ltd. (under liquidation), Cairo/Egypt Deutsche Gesellschaft für Wiederaufarbeitung von Kernbrennstoffen AG & Co. oHG, Essen DOTI Management GmbH, Oldenburg Dunkerque Eoliennes En Mer SAS, Montpellier/France Fassi Coal Pty. Ltd., Rutherford/Australia First River Energy LLC, Denver/USA Five Estuaries Offshore Wind Farm Limited, Swindon/United Kingdom Fond du Moulin SAS, Asnières-sur-Seine/France Gemeinschaftswerk Hattingen Gesellschaft mit beschränkter Haftung, Essen GfS Gesellschaft für Simulatorschulung mbH, Essen Kraftwerk Buer GbR, Gelsenkirchen KSG Kraftwerks-Simulator-Gesellschaft mbH, Essen KÜCKHOVENER Deponiebetrieb GmbH & Co. Kommanditgesellschaft, Bergheim KÜCKHOVENER Deponiebetrieb Verwaltungs-GmbH, Bergheim LDO Coal Pty. Ltd., Rutherford/Australia London Array Limited, Tunbridge Wells/United Kingdom Moravske Hidroelektrane d.o.o., Belgrade/Serbia 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 33 50 50 50 70 50 49 31 26 32 47 40 25 25 52 33 50 33 50 50 47 30 51 € ’000 472 5,483 82,215 4,931 – 2,290 1,732 120 – 17 – 10,197 – 1,399 8,460 – 135 2,045 67 5,113 666 27 26 – 103 0 4,000 € ’000 242 3 370 – 8,617 3 3,826 – 247 1,221 0 – 26 – 3,030 – 7,197 – 229 – 39 – 403 3 0 26 0 0 78 0 – 5 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 2021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 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 Parc Eolien Des Monts Jumeaux SAS, Paris/France Parc Eolien Du Coupru SAS, Paris/France Parc Eolien Du Vilpion SAS, Paris/France 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 (GP) Ltd., Calgary/Canada Versorium Energy LP, Calgary/Canada Walden Renewables Development LLC, New York City/USA Windesco Inc, Boston/USA WINDTEST Grevenbroich GmbH, Grevenbroich WP France 15 SAS, Puteaux/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. Direct Total € ’000 25 50 50 50 50 50 50 49 50 50 23 33 50 25 48 50 92 21 38 40 563 837 0 37 3 – 76 – 108 2,639 10,212 0 3,349 965 339 0 17,050 5,187 896 – 42 € ’000 – 25 – 515 0 – 3 – 4 – 26 – 37 114 – 23 0 – 14,410 635 753 – 87 3 3 9,274 – 1,765 – 70 – 18 4 No control by virtue of company contract. 5 Significant influence via indirect investments. 6 Significant influence by virtue of company contract. 214 RWE Annual Report 2021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 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 Energías Renovables de Ávila, S.A., Madrid/Spain E.ON SE, Essen Glenrothes Paper Limited, Glenrothes/United Kingdom High-Tech Gründerfonds II GmbH & Co. KG, Bonn 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 Direct 36 Total 36 6 5 17 15 0 1 31 15 15 15 29 10 10 10 12 10 6 4 29 12 € ’000 81,373 17,964 69,375 595 € ’000 14,880 1,680 – 5,555 0 10,642,800 2,113,800 – 594 107,586 0 0 0 0 69,649 44,956 68 67 0 82 2,392 316 19,636 95 21,877 4,415 – 4 – 4 – 159 0 0 0 1,693 0 – 2,423 – 95,326 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. 215 RWE Annual Report 2021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 Shareholding in % Equity Net income / loss 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 Umspannwerk Lübz GbR, Lübz Versorgungskasse Energie (VVaG) i.L., Hanover Versorium Energy Ltd., Calgary/Canada Direct Total 43 48 5 17 43 18 0 15 € ’000 18,947 2,147 390 1,000 41 51,729 – 309 € ’000 – 4,185 191 122 – 25 13 0 – 117 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 RWE Annual Report 2021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 Panther Creek Three Class B, LLC, Wilmington/USA Panther Creek Three Holdco, LLC, Wilmington/USA Rampion Offshore Wind Limited, Coventry/United Kingdom RWE Generation Service GmbH, Essen RWE Renewables Offshore HoldCo One GmbH, Essen RWE Renewables Offshore HoldCo Three GmbH, Essen RWE Renewables Offshore HoldCo Two GmbH, Essen RWE Renewables UK Dogger Bank South One Limited, Swindon/United Kingdom RWE Renewables UK Dogger Bank South Two Limited, Swindon/United Kingdom Solarengo Portugal, SGPS, Unipessoal Lda., Cascais/Portugal Additions to joint ventures accounted for using the equity method Meton Energy S.A., Athens/Greece Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 Change 100 100 50 100 100 100 100 100 100 100 Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 51 1 100 100 50 100 100 100 100 100 100 100 Change 51  Change 40 – 75 Change of joint ventures accounted for using the equity method into affiliated companies included in the consolidated financial statements Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 Rampion Renewables Limited, Coventry/United Kingdom Change of affiliated companies included in the consolidated financial statements into associated companies accounted for using the equity method Vela Wind Holdco, LLC, Wilmington/USA 1 No control by virtue of company contract. 100 25 60 1 100 217 RWE Annual Report 2021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 Disposal of affiliated companies included in the consolidated financial statements Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 Change Belectric France S.à.r.l., Vendres/France BELECTRIC GmbH, Kolitzheim Belectric Israel Ltd., Be’er Sheva/Israel Belectric Italia s.r.l., Latina/Italy Belectric Solar Ltd., Slough/United Kingdom Centrale Hydroelectrique d'Oussiat S.A.S., Paris/France Cranell Holdco, LLC, Wilmington/USA Cranell Wind Farm, LLC, Wilmington/USA 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 Glen Kyllachy Wind Farm Limited, Swindon/United Kingdom Inversiones Belectric Chile LTDA, Santiago de Chile/Chile 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 Raymond Holdco, LLC, Wilmington/USA Raymond Wind Farm, LLC, Wilmington/USA SAS Île de France S.A.S., Paris/France Stella Holdco, LLC, Wilmington/USA Stella Wind Farm, LLC, Wilmington/USA West Raymond Holdco, LLC, Wilmington/USA West Raymond Wind Farm, LLC, Wilmington/USA 218 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 74 100 100 100 100 100 100 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 100 – 74 – 100 – 100 – 100 – 100 – 100 – 100 – 100 RWE Annual Report 2021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 Disposal of associated companies accounted for using the equity method ATBERG – Eólicas do Alto Tâmega e Barroso, Lda., Ribeira de Pena/Portugal HIDROERG – Projectos Energéticos, Lda., Lisbon/Portugal Changes in shareholding without change of control Affiliated companies which are included in the consolidated financial statements Parc Eolien Les Pierrots SAS, Clichy/France RWE Windpark Bedburg A44n GmbH & Co. KG, Bedburg Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 40 32 Shareholding in % 31 Dec 2021 Shareholding in % 31 Dec 2020 60 51 100 100 Change – 40 – 32 Change – 40 – 49 219 RWE Annual Report 2021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 3 March 2022 Supervisory Board 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 End of term: 2025 Other appointments: • ProSiebenSat.1 Media SE1 until 5 May 2022 (Chairman) • Siemens AG1 Frank Bsirske2 Isernhagen Deputy Chairman until 15 September 2021 Ralf Sikorski2 Hanover Deputy Chairman since 21 September 2021 Deputy Chairman of IG Bergbau, Chemie, Energie Year of birth: 1961 Member since 1 July 2014 End of term: 2026 Other appointments: • CHEMIE Pensionsfonds AG • Lanxess AG1 • Lanxess Deutschland GmbH • RAG AG • RWE Generation SE3 • RWE Power AG3 Former Chairman of ver.di - Vereinte Dienstleistungsgewerkschaft • KSBG Kommunale Verwaltungsgesellschaft GmbH Year of birth: 1952 Member from 9 January 2001 to 15 September 2021 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 End of term: 2026 • 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. 220 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the Notes) 5 Further information Sandra Bossemeyer2 Duisburg Matthias Dürbaum2 Heimbach Chairwoman of the Works Council of RWE AG Chairman of the Works Council of the Hambach Opencast Mine, RWE Power AG Representative of the disabled Year of birth: 1965 Member since 20 April 2016 End of term: 2026 Martin Bröker2 Bochum Head of Corporate IT & SAP at RWE AG Year of birth: 1966 Member from 1 September 2018 to 15 September 2021 Dr. Hans Friedrich Bünting Mülheim an der Ruhr Independent Corporate Consultant Year of birth: 1964 Member since 28 April 2021 End of term: 2025 Anja Dubbert2 Essen Business Development Manager Year of birth: 1987 Member since 30 September 2019 End of term: 2026 Ute Gerbaulet Düsseldorf General Partner at Dr. August Oetker KG Year of birth: 1968 Member since 27 April 2017 End of term: 2024 Other appointments: • Flaschenpost SE - Dr. August Oetker Nahrungsmittel KG (Chairwoman) - OEDIV Oetker Daten- und Informationsverarbeitung KG (Chairwoman) - Oetker Digital GmbH (Chairwoman) - Radeberger Gruppe KG - NRW.Bank AöR Prof. Dr.-Ing. Dr.-Ing. E. h. Hans-Peter Keitel Essen Member of the Works Council of RWE Supply & Trading GmbH Former Chairman of the Executive Board of HOCHTIEF AG Year of birth: 1979 Member from 27 September 2019 to 15 September 2021 Independent Corporate Consultant Year of birth: 1947 Member since 18 April 2013 End of term: 2024 • 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. 221 RWE Annual Report 2021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 End of term: 2025 Other appointments: - Andritz AG1 - Kärntner Energieholding Beteiligungs GmbH (Chairwoman) - KELAG-Kärntner Elektrizitäts AG - Siemens AG Austria Thomas Kufen Essen Mayor of the City of Essen Year of birth: 1973 Court-appointed Member since 18 October 20214 Other appointments: • Essener Versorgungs- und Verkehrsgesellschaft mbH (EVV) (Chairman) • Stadtwerke Essen AG (Chairman) - Advisory Board, Sparkasse Essen (Chairman) - RAG Foundation (Member of the Board of Trustees) Reiner van Limbeck2 Dinslaken Chairman of the Works Council of the Essen Headquarters, RWE Generation SE and RWE Technology International GmbH Year of birth: 1965 Member since 15 September 2021 End of term: 2026 Other appointments: • RWE Generation SE3 Harald Louis2 Jülich Chairman of the General Works Council of RWE Power AG Year of birth: 1967 Member since 20 April 2016 End of term: 2026 Other appointments: • RWE Power AG3 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 from 4 January 2005 to 28 April 2021 • 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. 4 The AGM on 28 April 2022 will decide on Mr. Kufen‘s appointment to the Supervisory Board. 222 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the Notes) 5 Further information Peter Ottmann Nettetal Former Managing Director of Verband der kommunalen RWE-Aktionäre GmbH Attorney Former Chief Administrative Officer of Viersen County Year of birth: 1951 Member from 20 April 2016 to 28 April 2021 Dagmar Paasch2 Solingen Other appointments: • BDO AG Wirtschaftsprüfungsgesellschaft • Hannover Rück SE1 • HDI Haftpflichtverband der Deutschen Industrie VVaG • Talanx AG1 Dr. Wolfgang Schüssel Vienna, Austria Former Federal Chancellor of the Republic of Austria Year of birth: 1945 Head of NRW Supply and Waste Management Division at ver.di Dienstleistungsgewerkschaft Member from 1 March 2010 to 28 April 2021 Year of birth: 1974 Member from 15 September 2021 End of term: 2026 Other appointments: • RWE Generation SE3 Günther Schartz Wincheringen Other appointments: - Adenauer Stiftung (Chairman of the Board of Trustees) - PJSC LUKOIL1 Dirk Schuhmacher2 Rommerskirchen Chairman of the HW Grefrath Works Council, RWE Power AG Year of birth: 1970 Former Chief Administrative Officer of the District of Trier-Saarburg Member since 15 September 2021 Year of birth: 1962 Member from 20 April 2016 to 30 September 2021 Dr. Erhard Schipporeit Hanover Independent Corporate Consultant Year of birth: 1949 Member since 20 April 2016 End of term: 2024 End of term: 2026 Ullrich Sierau Dortmund Independent Consultant for Companies, Administrations, Political Parties and Civil Society Initiatives Year of birth: 1956 Member since 20 April 2011 End of term: 2024 • 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. 223 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the Notes) 5 Further information Hauke Stars Königstein Dr. Andreas Wagner2 Grevenbroich Member of the Executive Board of Volkswagen AG Head of Drilling and Water Management, RWE Power AG Year of birth: 1967 Member since 28 April 2021 End of term: 2025 Other appointments: • Audi AG • CARIAD SE - Kühne + Nagel International AG Helle Valentin Birkeroed, Denmark Managing Partner, IBM Consulting EMEA, IBM Corporation Year of birth: 1967 Member since 28 April 2021 End of term: 2025 Other appointments: - PFA Holding A / S, Denmark until 7 March 2022 - PFA Pension, Forsikringsaktieselskab, Denmark until 7 March 2022 - IBM Danmark ApS, Denmark Year of birth: 1967 Member since 15 September 2021 End of term: 2026 Marion Weckes2 Dormagen Officer of the Group Works Council of GEA Group AG Year of birth: 1975 Member since 20 April 2016 End of term: 2026 Leonhard Zubrowski2 Lippetal Chairman of the Group Works Council of RWE AG Year of birth: 1961 Member from 1 July 2014 to 15 September 2021 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. 224 RWE Annual Report 2021 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) Ute Gerbaulet Prof. Dr. Hans-Peter Keitel Reiner van Limbeck Dirk Schuhmacher Ralf Sikorski Mediation Committee in accordance with Section 27, Paragraph 3 of the German Co-Determination Act Dr. Werner Brandt (Chairman) Thomas Kufen Ralf Sikorski Marion Weckes Personnel Affairs Committee Dr. Werner Brandt (Chairman) Sandra Bossemeyer Dr. Hans Friedrich Bünting Harald Louis Ralf Sikorski Hauke Stars Audit Committee Dr. Erhard Schipporeit (Chairman) Michael Bochinsky Matthias Dürbaum Mag. Dr. h. c. Monika Kircher Dagmar Paasch Ullrich Sierau Nomination Committee Dr. Werner Brandt (Chairman) Prof. Dr. Hans-Peter Keitel Hauke Stars Strategy and Sustainability Committee Dr. Werner Brandt (Chairman) Michael Bochinsky Dr. Hans Friedrich Bünting Prof. Dr. Hans-Peter Keitel Harald Louis Dagmar Paasch Ralf Sikorski Helle Valentin 225 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the Notes) 5 Further information Executive Board Dr. Markus Krebber Chief Executive Officer since 1 May 2021 Dr. Michael Müller Chief Financial Officer since 1 May 2021 Member of the Executive Board of RWE AG since 1 October 2016, Member of the Executive Board of RWE AG since 1 November 2020, appointed until 30 June 2026 Chief Financial Officer to 30 April 2021 Offices: • Group Communications & Public Affairs • Energy Transition & Regulatory Affairs • Legal, Compliance & Insurance • Mergers & Acquisitions • Strategy & Sustainability • Corporate Transformation Other appointments: • RWE Generation SE2 (Chairman) • RWE Power AG2 • RWE Renewables GmbH2 (Chairman) • RWE Supply & Trading GmbH2 appointed until 31 October 2023 Managing Director and CFO of RWE Supply & Trading GmbH from 1 September 2016 to 30 April 2021 (posts held concurrently from 1 November 2020 to 30 April 2021) Offices: • Accounting • Controlling & Risk Management • Finance & Credit Risk • Investor Relations • Tax Other appointments: • Amprion GmbH • RWE Generation SE2 • RWE Power AG2 • RWE Renewables GmbH2 • 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. 226 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Boards (part of the Notes) 5 Further information Zvezdana Seeger Dr. Rolf Martin Schmitz Chief HR Officer and Labour Director since 1 November 2020 Chief Executive Officer of RWE AG from 15 October 2016 to 30 April 2021 Member of the Executive Board of RWE AG since 1 November 2020, Member of the Executive Board of RWE AG from 1 May 2009 to 30 April 2021 appointed until 31 October 2023 Labour Director of RWE AG from 1 May 2017 to 31 October 2020 Offices: • HR Services & Analytics • Employee Relations • People Management & Talent Attraction • Group Information Technology • Internal Audit & Security Other appointments: • Deutsche Kreditbank AG • RWE Generation SE2 • RWE Pensionsfonds AG2 (Chairwoman) • RWE Power AG2 (Chairwoman) • RWE Supply & Trading GmbH2 - Kärntner Energieholding Beteilgungs GmbH - KELAG-Kärntner Elektrizitäts-Aktiengesellschaft • 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. 227 RWE Annual Report 2021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. 3a 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. Audit Opinions Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any We have audited the consolidated financial statements of RWE Aktiengesellschaft, Essen, reservations relating to the legal compliance of the consolidated financial statements and and its subsidiaries (the Group), which comprise the consolidated statement of financial of the group management report. position as at December 31, 2021, and the consolidated statement of comprehensive income, consolidated income statement, consolidated statement of changes in equity and Basis for the Audit Opinions consolidated statement of cash flows for the financial year from January 1 to December 31, We conducted our audit of the consolidated financial statements and of the group 2021, and notes to the consolidated financial statements, including a summary of management report in accordance with § 317 HGB and the EU Audit Regulation significant accounting policies. In addition, we have audited the group management report (No. 537 / 2014, referred to subsequently as “EU Audit Regulation”) in compliance with of RWE Aktiengesellschaft, which is combined with the Company’s management report, for German Generally Accepted Standards for Financial Statement Audits promulgated by the the financial year from January 1 to December 31, 2021. Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). We performed In our opinion, on the basis of the knowledge obtained in the audit, International Standards on Auditing (ISAs). Our responsibilities under those requirements, the audit of the consolidated financial statements in supplementary compliance with the • the accompanying consolidated financial statements comply, in all material respects, with of the Consolidated Financial Statements and of the Group Management Report” section of the IFRSs as adopted by the EU, and the additional requirements of German commercial our auditor’s report. We are independent of the group entities in accordance with the law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German requirements of European law and German commercial and professional law, and we have Commercial Code] and, in compliance with these requirements, give a true and fair view of fulfilled our other German professional responsibilities in accordance with these the assets, liabilities, and financial position of the Group as at December 31, 2021, and of requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit principles and standards are further described in the “Auditor’s Responsibilities for the Audit its financial performance for the financial year from January 1 to December 31, 2021, and 228 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information Regulation, we declare that we have not provided non-audit services prohibited under Goodwill is tested for impairment annually or when there are indications of impairment, Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained to determine any possible need for write-downs. The carrying amounts of the relevant is sufficient and appropriate to provide a basis for our audit opinions on the consolidated cash-generating units, including goodwill, are compared with the corresponding financial statements and on the group management report. recoverable amounts in the context of the impairment tests. The recoverable amount is Key Audit Matters in the Audit of the Consolidated Financial Statements tests are performed at the level of the cash-generating units or groups of cash- Key audit matters are those matters that, in our professional judgment, were of most generating units to which the respective goodwill is allocated. The measurements to significance in our audit of the consolidated financial statements for the financial year from calculate the fair value less costs of disposal carried out for the purposes of the January 1 to December 31, 2021. These matters were addressed in the context of our audit impairment tests are based on the present values of the future cash flows generally of the consolidated financial statements as a whole, and in forming our audit opinion derived from the planning projections for the next three years (medium-term plan) thereon; we do not provide a separate audit opinion on these matters. prepared by the executive directors and acknowledged by the supervisory board. generally calculated on the basis of fair value less costs of disposal. The impairment Expectations relating to future market developments and country-specific assumptions In our view, the matters of most significance in our audit were as follows: about the performance of macroeconomic indicators are also taken into account. Recoverability of goodwill Recoverability in the „Coal / Nuclear“ segment Present values are calculated using discounted cash flow models. The discount rate applied is the weighted average cost of capital for the relevant cash- generating unit. The impairment test determined that no write-downs were necessary. The outcome of these valuations is dependent to a large extent on the estimates made by the executive Our presentation of these key audit matters has been structured in each case as follows: directors of the future cash inflows of the cash-generating units, and on the respective Matter and issue Audit approach and findings Reference to further information discount rates, rates of growth and other assumptions employed. The measurement is therefore subject to considerable uncertainty. Against this background and due to the underlying complexity of the measurement, this matter was of particular significance in the context of our audit. Hereinafter we present the key audit matters: As part of our audit, we, among other things, evaluated the method used for performing Recoverability of goodwill impairment tests and assessed the calculation of the weighted average cost of capital. In addition, we assessed whether the future cash inflows underlying the measurements In the consolidated financial statements of RWE Aktiengesellschaft, goodwill amounting together with the weighted cost of capital used represent an appropriate basis for the to €2.7 billion (1.9 % of consolidated total assets; previous year: €2.7 billion, or 4.4 % of impairment tests overall. We evaluated the appropriateness of the future cash inflows consolidated total assets) is reported under the balance sheet item “Intangible assets”. used in the calculations, among other things, by comparing this data with the Group’s 229 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information medium-term plan and by reconciling it against general and sector-specific market expectations. In this context, we also assessed whether the costs of Group functions coal, natural gas and CO2 certificate prices as well as the planned service lives. The outcome of these valuations is dependent to a large extent on the estimates made by were properly included in the respective cash-generating unit. With the knowledge the executive directors of the future cash flows, and on the discount rates, rates of that even relatively small changes in the discount rate applied can have material effects growth and other assumptions employed. The measurement is therefore subject to on the fair values less costs of disposal calculated in this way, we also focused our considerable uncertainties, so that this matter was of particular significance in the assessment on the parameters used to determine the discount rate applied, and context of our audit. evaluated the measurement model. Furthermore, we evaluated the sensitivity analyses performed by the Company in order to assess any impairment risk (carrying amount As part of our audit, we, among other things, evaluated the method used for testing the higher than recoverable amount) in the event of a reasonably possible change in a recoverability of property, plant and equipment and assessed the calculation of the material assumption underlying the measurement. Overall, the measurement weighted average cost of capital. In addition, we assessed whether the future cash parameters and assumptions used by the executive directors are in line with our inflows underlying the measurements together with the weighted cost of capital used expectations and are also within the ranges considered by us to be reasonable. represent an appropriate basis for testing recoverability overall. We assessed the appropriateness of the future cash inflows used in the measurement by, inter alia, The Company’s disclosures relating to goodwill are contained in the notes to the comparing this data with the medium-term planning and reconciling it against general financial statements in section “Notes to the Balance Sheet” in note “(10) Intangible assets”. and sector-specific market expectations with regard to electricity, coal, natural gas and CO2 certificate prices and the planned service lives. Furthermore, on the basis of the medium-term planning, we assessed the recoverability of the property, plant and Recoverability in the „Coal / Nuclear“ segment equipment based on the evidence provided to us. With the knowledge that even In the consolidated financial statements of RWE Aktiengesellschaft open cast mines relatively small changes in the discount rate applied can have material effects on the (hereinafter referred to as “property, plant and equipment”) in the “Coal / Nuclear” fair values calculated in this way, we also focused our assessment on the parameters segment amounting to €0.9 billion were impaired due to the significant deterioration used to determine the discount rate applied, and evaluated the measurement model. on market conditions stemming from regulatory climate protection measures. The Overall, the measurement parameters and assumptions used by the executive directors recoverability of property, plant and equipment was tested on the basis of their fair are in line with our expectations and are also within the ranges considered by us to be values less costs of disposal that exceed their values in use. The fair values of the reasonable. respective property, plant and equipment are determined by the Company as the present value of the future cash flows using discounted cash flow models. The budget projections for the coming three years (medium-term planning) prepared by the The Company’s disclosures relating to impairments of property, plant and equipment are contained in the notes to the financial statements in section “Notes to the Income executive directors and acknowledged by the supervisory board are used as a basis Statement” in note “(5) Depreciation, amortization and impairment losses”. and extrapolated on the basis of long-term assumptions with regard to electricity, 230 RWE Annual Report 2021 1 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information Other Information Responsibilities of the Executive Directors and the Supervisory Board for the The executive directors are responsible for the other information. Consolidated Financial Statements and the Group Management Report The other information comprises The executive directors are responsible for the preparation of the consolidated financial statements that 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 • the statement on corporate governance pursuant to § 289f HGB and § 315d HGB that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the • the separate non-financial group report pursuant to § 315b Abs. 3 HGB Group. In addition the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements • the annual report – excluding cross- references to external information – with the that are free from material misstatement, whether due to fraud or error. exception of the audited consolidated financial statements, the audited group management report and our auditor’s report In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability to continue as a going concern. They also have the Our audit opinions on the consolidated financial statements and on the group management responsibility for disclosing, as applicable, matters related to going concern. In addition, they report do not cover the other information, and consequently we do not express an audit are responsible for financial reporting based on the going concern basis of accounting opinion or any other form of assurance conclusion thereon. unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. In connection with our audit, our responsibility is to read the other information mentioned above and, in so doing, to consider whether the other information Furthermore, the executive directors are responsible for the preparation of the group • is materially inconsistent with the consolidated financial statements, with the group and is, in all material respects, consistent with the consolidated financial statements, management report disclosures audited in terms of content or with our knowledge complies with German legal requirements, and appropriately presents the opportunities management report that, as a whole, provides an appropriate view of the Group’s position obtained in the audit, or and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the • otherwise appears to be materially misstated. preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for If, based on the work we have performed, we conclude that there is a material misstatement the assertions in the group management report. of this other information, we are required to report that fact. We have nothing to report in this regard. 231 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information The supervisory board is responsible for overseeing the Group’s financial reporting process detecting a material misstatement resulting from fraud is higher than for one resulting for the preparation of the consolidated financial statements and of the group management from error, as fraud may involve collusion, forgery, intentional omissions, report. misrepresentations, or the override of internal control. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of • Obtain an understanding of internal control relevant to the audit of the consolidated the Group Management Report financial statements and of arrangements and measures (systems) relevant to the audit Our objectives are to obtain reasonable assurance about whether the consolidated of the group management report in order to design audit procedures that are financial statements as a whole are free from material misstatement, whether due to fraud appropriate in the circumstances, but not for the purpose of expressing an audit opinion or error, and whether the group management report as a whole provides an appropriate on the effectiveness of these systems. view of the Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German • Evaluate the appropriateness of accounting policies used by the executive directors and legal requirements and appropriately presents the opportunities and risks of future the reasonableness of estimates made by the executive directors and related disclosures. development, as well as to issue an auditor’s report that includes our audit opinions on the consolidated financial statements and on the group management report. • Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material Reasonable assurance is a high level of assurance, but is not a guarantee that an audit uncertainty exists related to events or conditions that may cast significant doubt on the conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance Group’s ability to continue as a going concern. If we conclude that a material uncertainty with German Generally Accepted Standards for Financial Statement Audits promulgated exists, we are required to draw attention in the auditor’s report to the related disclosures in by the Institut der Wirtschaftsprüfer (IDW) and supplementary compliance with the ISAs the consolidated financial statements and in the group management report or, if such will always detect a material misstatement. Misstatements can arise from fraud or error disclosures are inadequate, to modify our respective audit opinions. Our conclusions are and are considered material if, individually or in the aggregate, they could reasonably based on the audit evidence obtained up to the date of our auditor’s report. However, be expected to influence the economic decisions of users taken on the basis of these future events or conditions may cause the Group to cease to be able to continue as a consolidated financial statements and this group management report. going concern. We exercise professional judgment and maintain professional skepticism throughout the • Evaluate the overall presentation, structure and content of the consolidated financial audit. We also statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated • Identify and assess the risks of material misstatement of the consolidated financial financial statements give a true and fair view of the assets, liabilities, financial position and statements and of the group management report, whether due to fraud or error, design financial performance of the Group in compliance with IFRSs as adopted by the EU and and perform audit procedures responsive to those risks, and obtain audit evidence that is the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB. sufficient and appropriate to provide a basis for our audit opinions. The risk of not 232 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information • Obtain sufficient appropriate audit evidence regarding the financial information of of the current period and are therefore the key audit matters. We describe these matters in the entities or business activities within the Group to express audit opinions on the our auditor’s report unless law or regulation precludes public disclosure about the matter. consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain Other legal and regulatory requirements solely responsible for our audit opinions. • Evaluate the consistency of the group management report with the consolidated financial Statements and the Group Management Report Prepared for Publication Purposes in statements, its conformity with German law, and the view of the Group’s position it Accordance with § 317 Abs. 3a HGB Report on the Assurance on the Electronic Rendering of the Consolidated Financial provides. Assurance Opinion • Perform audit procedures on the prospective information presented by the executive We have performed assurance work in accordance with § 317 Abs. 3a HGB to obtain directors in the group management report. On the basis of sufficient appropriate audit reasonable assurance as to whether the rendering of the consolidated financial statements evidence we evaluate, in particular, the significant assumptions used by the executive and the group management report (hereinafter the “ESEF documents”) contained in the directors as a basis for the prospective information, and evaluate the proper derivation of electronic file RWE_AG_KA_KLB_ESEF_2021-12-31.zip and prepared for publication the prospective information from these assumptions. We do not express a separate audit purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the opinion on the prospective information and on the assumptions used as a basis. There is a electronic reporting format (“ESEF format”). In accordance with German legal requirements, substantial unavoidable risk that future events will differ materially from the prospective this assurance work extends only to the conversion of the information contained in the information. consolidated financial statements and the group management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any We communicate with those charged with governance regarding, among other matters, other information contained in the electronic file identified above. the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In our opinion, the rendering of the consolidated financial statements and the group management report contained in the electronic file identified above and prepared for We also provide those charged with governance with a statement that we have complied publication purposes complies in all material respects with the requirements of § 328 Abs. 1 with the relevant independence requirements, and communicate with them all relationships HGB for the electronic reporting format. Beyond this assurance opinion and our audit and other matters that may reasonably be thought to bear on our independence, and where opinion on the accompanying consolidated financial statements and the accompanying applicable, the related safeguards. group management report for the financial year from January 1 to December 31, 2021, contained in the “Report on the Audit of the Consolidated Financial Statements and on the From the matters communicated with those charged with governance, we determine those Group Management Report” above, we do not express any assurance opinion on the matters that were of most significance in the audit of the consolidated financial statements information contained within these renderings or on the other information contained in the electronic file identified above. 233 RWE Annual Report 2021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 Assurance Opinion to fraud or error. We exercise professional judgment and maintain professional skepticism We conducted our assurance work on the rendering of the consolidated financial throughout the assurance work. We also: statements and the group management report contained in the electronic file identified above in accordance with § 317 Abs. 3a HGB and the IDW Assurance Standard: Assurance • Identify and assess the risks of material non-compliance with the requirements of Work on the Electronic Rendering, of Financial Statements and Management Reports, § 328 Abs. 1 HGB, whether due to fraud or error, design and perform assurance Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB (IDW AsS 410 procedures responsive to those risks, and obtain assurance evidence that is sufficient and (10.2021)) and the International Standard on Assurance Engagements 3000 (Revised). appropriate to provide a basis for our assurance opinion. Our responsibility in accordance therewith is further described in the “Group Auditor’s Responsibilities for the Assurance Work on the ESEF Documents” section. Our audit firm • Obtain an understanding of internal control relevant to the assurance work on the applies the IDW Standard on Quality Management 1: Requirements for Quality ESEF documents in order to design assurance procedures that are appropriate in the Management in the Audit Firm (IDW QS 1). circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls. Responsibilities of the Executive Directors and the Supervisory Board for the ESEF Documents • Evaluate the technical validity of the ESEF documents, i. e., whether the electronic file The executive directors of the Company are responsible for the preparation of the ESEF containing the ESEF documents meets the requirements of the Delegated Regulation (EU) documents including the electronic renderings of the consolidated financial statements and 2019 / 815 in the version in force at the date of the consolidated financial statements on the group management report in accordance with § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB the technical specification for this electronic file. and for the tagging of the consolidated financial statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB. • Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited group In addition, the executive directors of the Company are responsible for such internal control management report. as they have 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 • Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) electronic reporting format, whether due to fraud or error. in accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019 / 815, in the version in force at the date of the consolidated financial statements, The supervisory board is responsible for overseeing the process for preparing the ESEF enables an appropriate and complete machine-readable XBRL copy of the XHTML documents as part of the financial reporting process. rendering. Group Auditor’s Responsibilities for the Assurance Work on the ESEF Documents Further Information pursuant to Article 10 of the EU Audit Regulation Our objective is to obtain reasonable assurance about whether the ESEF documents are We were elected as group auditor by the annual general meeting on April 28, 2021. We free from material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due were engaged by the supervisory board on April 28, 2021. We have been the group auditor of RWE Aktiengesellschaft, Essen without interruption since the financial year 2001. 234 RWE Annual Report 20211 To our investors 2 Combined review of  operations 3 Responsibility statement 4 Consolidated financial statements Independent auditor’s report 5 Further information 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). Reference to an other matter – use of the auditor‘s report Our auditor’s report must always be read together with the audited consolidated financial statements and the audited group management report well as the assured ESEF documents. The consolidated financial statements and the group management report converted to the ESEF format – including the versions to be published in the Federal Gazette – are merely electronic renderings of the audited consolidated financial statements and the audited group management report and do not take their place. In particular, the “Report on the Assurance on the Electronic Rendering of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB” and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form. German Public Auditor responsible for the engagement The German Public Auditor responsible for the engagement is Aissata Touré. Essen, March 4, 2022 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (sgd. Markus Dittmann) (sgd. Aissata Touré) Wirtschaftsprüfer Wirtschaftsprüferin (German Public Auditor) (German Public Auditor) 235 RWE Annual Report 2021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 2021 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 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. The auditor at PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft responsible for RWE is Ms. Aissata Touré. Ms. Touré performed this function for the first time. 236 RWE Annual Report 2021“The most beautiful aspect of recultivation is experiencing nature reborn in all its diversity.” Gregor Eßer, Director of the Recultivation Research Centre, RWE Power 5 Further information 5.1 Five-year overview 5.2 Imprint 5.3 Financial calendar 238 239 240 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 assets (+) / net debt (–) Workforce at the end of the year2 CO2 emissions of our power stations € million € million € million € million € million € € million € million € million € million € million € million € million € million % € million million metric tons 2021 24,526 3,650 2,185 1,522 721 1.07 7,274 4,562 38,863 103,446 16,996 28,306 97,007 142,309 11.9 360 18,246 80.9 2020 13,688 3,286 1,823 1,265 1,051 1.65 4,125 1,132 34,418 27,224 17,706 27,435 16,501 61,642 28.7 – 4,432 19,498 67.0 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 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 – 19,339 – 20,227 17,748 118.0 59,547 131.8 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. 238 RWE Annual Report 2021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 5179-5619 Fax +49 201 5179-420042 Internet www.rwe.com/ir E-mail invest@rwe.com Corporate Communications Phone +49 201 5179-5009 E-mail communications@rwe.com For annual reports, interim reports, interim statements and further information on RWE, please visit us online at www.rwe.com/en. RWE is a member of DIRK – the German Investor Relations Association. This document was published on 15 March 2022. 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. Typesetting and production MPM Corporate Communication Solutions, Mainz, Germany www.mpm.de Translation Olu Taylor, Geretsried, Germany Proofreading Nicola Thackeray, Swindon, UK Photography André Laaks, Essen, Germany RWE Mediendatenbank 239 RWE Annual Report 2021Financial calendar 2022 / 2023 28 April 2022 29 April 2022 03 May 2022 12 May 2022 Virtual 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 21 March 2023 Annual report for fiscal 2022 04 May 2023 05 May 2023 09 May 2023 11 May 2023 Annual General Meeting Ex-dividend date Dividend payment Interim statement on the first quarter of 2023 10 August 2023 Interim report on the first half of 2023 14 November 2023 Interim statement on the first three quarters of 2023 The Annual General Meeting and all events concerning the publication of our financial reports are broadcast live on the internet and recorded. We will keep recordings on our website for at least twelve months. 

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