E.on International Finance B.v. Semi Annual Report 2012

7/28/2019 E.on International Finance B.v. Semi Annual Report 2012

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E.ON International Finance B.V.

Interim Report 20121 January 2012 30 June 2012

Rotterdam, the Netherlands


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Contents 2


Company Board and Management 3Report of the Board of Management 3Statement from the Board of Management 5

Condensed Interim Financial Statements of E.ON International Finance B.V. 6Condensed Balance Sheet (before profit appropriation) 6Condensed Income Statement 7Condensed Cash flow Statement 8Notes to the condensed interim financial statements 9Review report 14


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Board of Management 3


Report of the Board of Management

General information

As of June 30, 2012, the composition of the Board of Management as well as the objectives ofE.ON International Finance B.V. are unchanged compared to the financial year ended December31, 2011. E.ON International Finance B.V. continues to be a wholly owned and fully consolidatedsubsidiary of E.ON AG, Dsseldorf, Germany.

Internal organisation

The statutory seat and the office of E.ON International Finance B.V. is Capelseweg 400 inRotterdam. Until March 31, 2012 E.ON International Finance B.V. also operated a second office inVenlo, which has been closed.

At June 30, 2012 E.ON International Finance B.V. had no own employees (2011: 0). All personnelis either seconded from other E.ON group companies or employed by E.ON Benelux N.V. under aservice level agreement.

Market review

In the first half of 2012 concerns surrounding peripheral European countries continued to be themain driver influencing the international capital markets. This lead to a continuously high degree ofvolatility with regard to foreign exchange rates, with the Euro again weakening against the USDollar and the British Pound. Interest rates both long term and short term rates again continuedtheir downward trend in the first half of 2012 reaching new historic lows. Also credit spreadscontinued their trend towards a strong differentiation amongst European sovereign issuers, withspreads again increasing especially for peripheral countries. Corporate issuers credit spreads ingeneral followed this trend resulting in a strong dependence on their respective country spread inaddition to their own industry and company developments. Utility spreads specifically underlinedthis trend with companies domiciled in peripheral European countries reaching much widerspreads compared to their peers. As to issuance volumes, the Euro Corporate Bond market

issuance activity increased significantly compared to the low prior years figures, with corporateinvestment grade issuance levels as well as utility issuance activities being also well above 2011levels.

Business review

Also in the first half of 2012 the liquidity situation of the E.ON group continued to be comfortableresulting in no new notes issuance for E.ON International Finance B.V. Instead bonds valuing 0.9billion matured during the first half of 2012. Slightly offset by the foreign exchange effects due tothe weakening of the Euro against the US Dollar and British Pound the total amount of notesoutstanding as of June 30, 2012 decreased to 22.3 billion. At year end 2011 E.ON InternationalFinance B.V. had 23.0 billion of bonds outstanding.

Apart from the above mentioned foreign exchange effects on the Euro value of Non-Eurodenominated bonds, the market developments only had a limited impact on E.ON InternationalFinance B.V.s bond business. Throughout the first half of 2012 E.ON spreads overall remainedfairly stable showing the continued confidence of investors in the E.ON credit.

In terms of the intra-group financing business, in the first half of 2012 E.ON International FinanceB.V. continued taking up intra-group loans or E.ON AG guaranteed short term deposits to fundlending activities to other E.ON group companies. Lending volumes increased during the firstquarter 2012 and remained fairly stable thereafter. As of June 30, 2012 loans totalling 3.5 billionwere granted on a short term basis, up from a portfolio of 2.1 billion as of year end 2011.Additionally, E.ON International Finance B.V. held liquidity amounting to 0.7 billion as of June 30,2012.

As a result of the above, the total asset base remained stable at 27.4 billion as of June 30, 2012

compared to 27.1 billion at year end 2011. Furthermore, E.ON International Finance B.V.s netprofit increased slightly from 10.5 million to 10.7 million. The main reasons were the higher


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average lending volumes within the treasury activities during the reporting period which, however,was somewhat offset by a change in the composition within the intra-group short term loanportfolio.

During the first half of 2012 no drawings were made on behalf of E.ON International Finance B.V.under both the 6 Billion Syndicated Credit Facility and the 10 Billion Multi Currency CommercialPaper Programme.

In April 2012, E.ONs Debt Issuance Programme was again extended for another year. The DebtIssuance Programme enables both E.ON AG and E.ON International Finance B.V. to issue debt toinvestors in public and private placements. The total programme volume is unchanged at 35 billion.

Financial information

Preparation of Financial Statements

The financial statements were prepared in accordance with the statutory provisions of Part 9, Book2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual

Reporting in the Netherlands as issued by the Dutch Accounting Standards Board.

The Interim Report 2012 has followed the same principles of recognizing and measuring as havebeen used for the preparation of the Financial Report 2011.

Financial performance

E.ON International Finance B.V. closed the first six months of 2012 with a profit from ordinaryactivities before taxes of approximately 14.3 million, compared to 14.0 million in the first half of2011.

Risk Information

E.ON International Finance B.V.s activities expose it to a variety of financial risks: market risk(including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk),credit risk and liquidity risk. The risk profile of E.ON International Finance B.V. did not materiallychange compared to the end of 2011.

The overall risk management programme of E.ON International Finance B.V. focuses on theunpredictability of financial markets and seeks to minimize potential adverse effects on E.ONInternational Finance B.V.s financial performance.

E.ON International Finance B.V. manages its risks with the procedures and systems used withinthe E.ON group. The Board is of the opinion that these procedures and systems provide anadequate risk management for E.ON International Finance B.V.


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Statement from the Board of Management

The Board of Management state that to the best of their knowledge, the condensed interimfinancial statements of 2012 prepared in accordance with the statutory provisions of Part 9, Book2, of the Netherlands Civil Code and the firm pronouncements in the Guidelines for Annual

Reporting in the Netherlands as issued by the Dutch Accounting Standards Board give a true andfair view of the assets, liabilities, financial position and profit or loss of E.ON International FinanceB.V. and that the management report includes a fair review of the development and performanceof the business and the position of the E.ON International Finance B.V., together with a descriptionof the principal risks and uncertainties that it faces.

Rotterdam, August 27, 2012

Board of Management, E.ON International Finance B.V.

M. Bokelmann J. Trapman J. OttoDirector Director Director


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Condensed Interim Financial Statements 6


Balance Sheet (before profit appropriation)

Jun 30, 2012 Dec 31, 2011

in thousands Note

Financial fixed assetsLoans to shareholder 14,631,409 16,506,193Loans to group entities 3,878,088 3,786,110

3 18,509,497 20,292,303

Current assetsAmounts due from shareholder 4,495,540 3,471,440Amounts due from group entities 3,628,733 2,176,561Amounts due from tax authorities 1,268 -

8,125,541 5,648,001

Cash 4 716,952 1,187,997

Total assets 27,351,990 27,128,301

Shareholders equityIssued share capital 200 200Share premium reserve 36,992 36,992Other reserves 152,242 130,768Undistributed profit 10,711 21,474

5 200,145 189,434

ProvisionsProvision for loss making contracts 70,980 77,581Provision for deferred taxes 419 462

71,399 78,043

BorrowingsBonds 6 18,586,484 20,488,696

Current liabilitiesAmounts due to shareholder 109,850 71,579Amounts due to group entities 3,261,183 3,190,539Amounts due to associated companies 878,151 6,985Amounts due to others 4,244,778 3,098,078Amounts due to tax authorities - 4,947

8,493,962 6,372,128

Total equity and liabilities 27,351,990 27,128,301


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Income Statement

Six months ended June 30,2012 2011

in thousands Note

Interest and similar income 9 740,551 866,234Exchange rate difference gains 402,525 764,665Financial income 1,143,076 1,630,899

Interest and similar expenses 10 (726,205) (850,602)Exchange rate difference losses (402,187) (765,399)Financial expenses (1,128,392) (1,616,001)

Total financial result 14,684 14,898

Operating expenses (403) (901)

Total operating expenses (403) (901)

Result of ordinary activities before corporateincome tax 14,281 13,997

Corporate income taxes (3,570) (3,500)

Net Profit 10,711 10,497


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Cash flow Statement

Six months ended June 30,2012 2011

in thousands

Interest paid (813,361) (987,329)Interest received 849,166 1,033,657Expenses paid (706) (801)Income tax paid (9,856) (5,932)

Cash flows from operating activities 25,243 39,595

Loans granted to related parties (5,592,952) (14,152,877)Loan repayments received from related parties 5,045,322 14,612,787

Cash flows from investing activities (547,630) 459,910

Proceeds from borrowings 11,696,900 12,420,839Repayments of borrowings (11,645,558) (12,246,597)

Cash flows from financing activities 51,342 174,242

Net increase (decrease) in cash (471,045) 673,747

Cash at January 1 1,187,997 71,297Cash at June 30 716,952 745,044


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Other Information 9

Notes to the Condensed Interim Financial Statements

(1) General information

The activities of E.ON International Finance B.V. mainly comprise the financing of E.ON groupcompanies.

E.ON International Finance B.V., a corporation with limited liability, having its statutory seat inRotterdam, the Netherlands, considers E.ON AG, Dsseldorf, Germany to be its ultimate parentcompany. The financial information of E.ON International Finance B.V. is included in theconsolidated financial statements of E.ON AG, Germany. Copies of the consolidated financialstatements of E.ON AG can be obtained from E.ON AG in Dsseldorf.

The statutory seat and the office of E.ON International Finance B.V. is Capelseweg 400 inRotterdam. Until March 31, 2012 E.ON International Finance B.V. also operated a second office inVenlo, which has been closed.

These financial statements were authorized for issue by the Board of Management onAugust 27, 2012.

(2) Summary of significant accounting policies

Basis of preparation

The Condensed Interim Financial Statements have been prepared in accordance with the statutoryprovisions of Part 9, Book 2, of the Netherlands Civil Code and the firm pronouncements in theGuidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting StandardsBoard.

This interim report does not contain all information required for a full year financial report andneeds to be read in conjunction with the E.ON International Finance B.V. 2011 Annual Report,which has been prepared in accordance with the statutory provisions of Part 9, Book 2, of theNetherlands Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the

Netherlands as issued by the Dutch Accounting Standards Board.

The principles applied in preparing the Condensed Interim Financial Statement of E.ONInternational Finance B.V. are similar to those applied in the E.ON International Finance B.V. 2011Annual Report.

Comparison with prior period

The basis used for the valuation and result definition has remained unchanged with respect to theyear-end 2011.

Cash flow Statement

The Cash flow Statement was prepared according to the direct method. The funds included in theCash flow Statement consist of cash at banks and the inhouse banking account with E.ON AG.Cash flows in foreign currencies have been translated at the exchange rates existing on the day ofsettlement.

Related parties

In conducting its activities, E.ON International Finance B.V. has several transactions with itsshareholder E.ON AG, E.ON group companies and non-consolidated E.ON companies. The typesand the content of the transactions with related parties remain unchanged compared to the E.ONInternational Finance B.V. 2011 Annual Report.

Foreign currency translation

The functional currency as well as the reporting currency of E.ON International Finance B.V, is theEuro (). The financial statements are presented in Euro.


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Transactions denominated in foreign currencies are translated at the exchange rate at the date ofthe transaction. Monetary foreign currency items are adjusted to the exchange rate at eachbalance sheet date; any gains or losses resulting from fluctuations in the relevant currencies areincluded in the financial income and expenses, respectively.

Settled transactions in foreign currencies during the reporting period have been incorporated in thefinancial statements at the rate of settlement.

The following table shows the movements in exchange rates of the relevant foreign currencies forthe periods indicated:

Jun 30, 2012 Dec 31, 2011 Jun 30, 2011

ISO code

British Pound EUR/GBP 0.81 0.84 0.90U.S. Dollar EUR/USD 1.26 1.29 1.45Swiss Franc EUR/CHF 1.20 1.22 1.21Japanese Yen EUR/JPY 100.13 100.20 116.25

Swedish Krona EUR/SEK 8.77 8.91 9.17Czech Koruna EUR/CZK 25.64 25.79 24.35Norwegian Krone EUR/NOK 7.53 7.75 7.79Hong Kong Dollar EUR/HKD 9.77 10.05 11.25

Critical accounting estimates and judgments

The preparation of the financial statements requires management to make estimates andassumptions. It also requires management to exercise its judgment in the process of applyingE.ON International Finance B.V.s accounting policies. Estimates and judgments are based on pastexperience and on additional knowledge obtained on transactions to be reported and are reviewedon an ongoing basis. E.ON International Finance B.V. makes estimates and assumptionsconcerning future events. Actual events may differ from expectations and actual results will, bydefinition, seldom equal the accounting estimates.

Unless explained otherwise, the estimates made by the management in preparing the CondensedInterim Financial Statement are similar to those used in the Annual Report 2011.

(3) Financial fixed assets

Movement schedule financial fixed assets Jun 30, 2012

Total Loans toShareholder

Total Loansto GroupEntities

TotalFinancial

Fixed assets

in thousands

At January 1, 2012 16,506,193 3,786,110 20,292,303- New loans - - -- Amortization 5,691 334 6,025- Exchange differences 133,032 91,644 224,676- Current maturity (2,013,507) - (2,013,507)At June 30, 2012 14,631,409 3,878,088 18,509,497

During the first six months of 2012, E.ON International Finance B.V. did not issue any new long-term loans. Instead, the total amount of loans outstanding decreased by 0.6 billion, with 0.9billion scheduled maturities being slightly compensated by an increase of the Euro amounts ofNon-Euro denominated loans because of the weakening of the Euro.

The following table shows a detailed breakdown of these developments:


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Carrying amounts of loans in currencies to shareholder Jun 30 Dec 31

in thousands 2012 2011

EUR 13,691,660 13,951,753GBP 1,946,380 2,477,815USD 2,369,279 2,304,298

Other 207,616 203,797

Total loans to shareholder 18,214,935 18,937,663

Reclassification to current assets 3,583,526 2,431,470

Total long term loans in currencies to shareholder 14,631,409 16,506,193

Despite the repayment of two Euro denominated loans the vast majority of loans outstanding at theend of the reporting period continue to be denominated in Euro. In general, the amount of Non-Euro denominated loans increased slightly due to the weakening of the Euro; however, thestructure of the loan portfolio has not shifted significantly, although the amount of GBPdenominated loans decreased due to a scheduled loan maturity being repaid.

Carrying amounts of loans in currencies to group entities Jun 30 Dec 31


EUR 1,194,220 1,194,213GBP 2,584,399 2,495,272Other 99,469 96,625

Total loans to group entities 3,878,088 3,786,110

Reclassification to current assets - -

Total long term loans in currencies to group entities 3,878,088 3,786,110

The currency split of loans to group entities is roughly unchanged compared to year end with mostof the loans being denominated in British Pounds and Euro. The general weakening of the Euroresulted in a slight increase of the Non-Euro denominated loan amounts; however, the overallstructure of the loan portfolio remained unchanged.

(4) Cash

Specification of Cash Jun 30 Dec 31


Cash and cash equivalents 24 40Inhouse banking account at shareholder 716,928 1,187,957

Cash 716,952 1,187,997

Total cash mainly includes the inhouse banking account at E.ON AG. Having such an inhousebanking account at E.ON AG is common practice within the E.ON group. The decrease in volumeis a result of the higher amount of short term intragroup loans outstanding. The total cash is at freedisposal of E.ON International Finance B.V. and is to a large degree denominated in Euro.


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(5) Shareholders equity

The total authorized number of ordinary shares is 9,000 (2011: 9,000) with a par value of 100 pershare. The number of issued shares is 2,000 (2011: 2,000). All issued shares are fully paid in.

The share premium results exclusively from additional paid in capital.

Movement schedule equity Issuedcapital

Sharepremium

reserve

Otherreserves

Undistri-butedprofit

Total

in thousands

At January 1, 2011 200 36,992 98,238 32,530 167,960Appropriation of undistributed profit - - 32,530 (32,530) -Profit for the year ended Dec 31, 2011 - - - 21,474 21,474

At December 31, 2011 200 36,992 130,768 21,474 189,434Appropriation of undistributed profit - - 21,474 (21,474) -Profit for the half-year ended June 30, 2012 - - - 10,711 10,711

At June 30, 2012 200 36,992 152,242 10,711 200,145

Total equity of E.ON International B.V. increased to 200,145 million due to the Net Profit of 11 million achieved in the first six months of 2012.

(6) Bonds

Movement schedule bonds Jun 30 Dec 31


At January 1 20,488,696 24,448,183- New bonds - -- Amortization 5,179 14,681

- Bond buyback transaction - (1,808,518)- Exchange differences 239,660 325,077- Current maturity (2,147,051) (2,490,727)

At Balance sheet date 18,586,484 20,488,696

In the first six months of 2012 no new bonds were issued due to the continuously comfortableliquidity situation of the E.ON group. In line with that scheduled bond maturities of 0.9 billionreduced the amount of bonds outstanding, slightly offset by the general weakening of the Euro,resulting in a total reduction of the value of bonds outstanding by 0.6 billion.

The carrying amounts of the bonds are denominated in the following currencies:

Carrying amounts of bonds in currencies Jun 30 Dec 31 in thousands 2012 2011

EUR 13,155,739 13,201,763GBP 4,525,795 4,968,385USD 2,369,512 2,536,399CHF 1,287,711 1,274,065JPY 752,436 751,847Other currencies 253,068 246,964

Total bonds 22,344,261 22,979,423

Reclassification current liabilities 3,757,777 2,490,727

Total long term bonds 18,586,484 20,488,696


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At the end of the reporting period E.ON International Finance B.V.s outstanding bonds continue tobe mainly denominated in Euro, followed by British Pounds, US Dollar and Swiss Francs. Thechange in Euro denominated bonds outstanding is due to the scheduled maturity and repayment ofone Euro bond. For the amount of Non-Euro denominated bonds, the reduction due to thescheduled maturity and the repayment of one GBP and one USD denominated bond was slightlyoffset by the increased Euro values of the remaining bonds due to the weakening of the Euro.

The market value of bonds per June 30, 2012 is 27,1 billion (December 31, 2011: 27,4 billion).

(7) Contingent liability

In addition to the liabilities carried on the balance sheet there are other (mostly long term)commitments arising from contracts entered into with third parties on the basis of legalrequirements.

Specification notional amounts financial instruments Jun 30 Dec 31


Interest swaps 35,503 35,503Currency swaps 3,836,891 2,889,163

Total amounts due to others 3,872,394 2,924,666

The increase in currency swaps is mainly a result of increased hedges within the treasury activityof E.ON International Finance B.V. However, maturing bond and long term loan related hedgesreduced the effect somewhat.

Specification fair values financial instruments Jun 30 Dec 31


Interest swaps (7,470) (6,710)Currency swaps 386,220 457,632

Total amounts due to others 378,750 450,922

The fair value amount of currency swaps decreased due to the maturity of bond and long term loanrelated hedges. As the new treasury related hedges are generally of a short term nature, such fairvalue changes are usually smaller, despite the nominal amounts being bigger. Moreover, also theweakening of the Euro contributed to the reduction of the fair value amounts of the currency swapscontracted.

(8) Credit facility agreements

As of June 30, 2012 the following facilities are available:

35 Billion Debt Issuance Programme

10 Billion Multi Currency Commercial Paper Programme

6 Billion Dual Currency Syndicated Credit Facility Agreement

In April 2012 the 35 Billion Debt Issuance Programme was updated and extended for anotheryear. The Debt Issuance Programme enables both E.ON AG and E.ON International Finance B.V.to issue debt to investors in public and private placements. The total programme volume isunchanged at 35 billion.

The terms and conditions of the other two facilities are unchanged compared to year-end 2011.


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(9) Interest and similar income

Specification interest and similar income Six months ended June 30,


- interest and similar income from shareholder 573,712 701,920

- interest and similar income from group entities 156,725 154,721- interest and similar income from others 10,114 9,593

Total interest and similar income 740,551 866,234

Interest and similar income decreased in the first six months of 2012. This is mainly the result ofthe reduction in interest income from shareholder corresponding to a reduced lending volume toshareholder due to loan maturities and repayments. Interest and similar income from group entitiesincreased slightly following the increased average lending volume of the treasury operations, butalso due to the increase of the Euro values of Non-Euro denominated interest income resultingfrom the weakening of the Euro. Interest income from others mainly reflects the release of theprovision for loss making contracts, which is unchanged.

(10) Interest and similar expensesSpecification interest and similar expenses Six months ended June 30, in thousands 2012 2011

- interest expense to shareholder 74,560 76,904- interest expense to group entities 1,751 1,496- interest expense to associated companies 13,616 18,532- interest expense to others 636,278 753,670

Total interest and similar expense 726,205 850,602

Interest expenses decreased in the first half of 2012 mainly as a result of the reduced bond relatedinterest expenses following last years bond buyback transaction as well as the repayment of

maturing bonds. On the treasury activities, mainly the market driven reduction of short term interestrates lead to a reduction in the corresponding interest expenses.

Rotterdam, August 27, 2012

Board of Management, E.ON International Finance B.V.

M. Bokelmann J. Trapman J. OttoDirector Director Director


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E.on International Finance B.v. Semi Annual Report 2012

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