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EWE grows in 2007 despite regulatory and competitive pressure

• Sales up 12.5 per cent to € 4.7bn
• Operating result (EBIT) down slightly on the previous year
• Competition and regulation characterise the market environment
• Strategic growth in new markets

 

Oldenburg, Germany, 29 April 2008. The EWE Group’s 2007 financial year was characterised by increasing competition and renewed regulation in the energy market as well as the expansion of activities in the area of research and development. Against this backdrop the company expanded its international activities and entered the Turkish energy market. The Information and Telecommunications Technology segment provided significant growth – and not just through additional purchases.

EWE’s Chief Executive Officer, Dr. Werner Brinker, produced consistently good figures for the company in the 2007 financial year. “The past financial year reinforces our position in the market and makes me very confident for the challenges that lie ahead”, said Dr. Brinker. According to him, the expansion of the company’s own research activities also means looking beyond the usual reporting periods and securing a solid foundation for the company for successful business in the decades ahead.

As a capital-market-based company, EWE is for the first time providing consolidated financial statements in accordance with the international accounting standards, IFRS, for the 2007 financial year.

EWE increased its Group sales in 2007 by 12.5 per cent to € 4.7bn. All of the segments contributed to sales growth. Operating earnings before interest and taxes (EBIT) were down slightly on the previous year and stood at € 442.9m (down 5.0 per cent). The drop in earnings was primarily due to regulatory influences on the Network segment. The Group annual net profit was up 11.7 per cent to € 299.2m mainly as a result of tax effects. The proposed dividend per nominal € 5 share capital was increased to € 1.625 (previous year € 1.50).

Energy segment: increase in results due to improved electricity business
EWE increased its sales in the Energy segment last year by 7.4 per cent to  € 3.5bn. The increase in sales is derived from the electricity business and is due to both an increase in electricity sales of approximately 5 per cent and the increase in charges adjusted for costs of procuring electricity. The natural gas business developed differently: as a result of the very mild temperatures at the start of the year, natural gas sales fell by approximately 6 per cent on the previous year. The drop in natural gas prices, which EWE passed on to its customers in April 2007 as per the general pricing system, also led to a reduction in sales. EBIT increased to € 194.1m (previous year € 154.4m). The increase is primarily due to the fact that the previous year’s result in the Electricity segment was heavily burdened by delivery costs, which increased faster than selling prices.

Regulatory influences burden result in the Network segment
Sales in the Network segment in 2007 amounted to € 1.5bn (previous year € 1.4bn). The increase is primarily a result of the Renewable Energies Act levy to feed more electricity from renewable energy sources into the EWE network. EBIT was burdened by fee reductions in the electricity and natural gas network made by the regulatory authorities. It fell by 23 per cent to € 135.7m (previous year € 176.2m).

ICT segment with double digit growth rates
The ICT (Information and Telecommunications Technology) segment recorded a particularly significant increase in sales and results of approximately 25 and 27 per cent respectively. Sales increased to € 550.3m (previous year € 439.9m); EBIT increased to € 42.8m (previous year € 33.8m). The acquisition of the Brunswick telecommunications provider, BCC, and the expansion of the BTC Group contributed to this, as did the positive development of all of the Group subsidiaries in their respective markets. In the private customer segment the telecommunications companies in the Group won additional market shares and increased the number of direct connections by 16 per cent to more than 550,000.

Corporate Centre with improved participation result
Sales increased in the Corporate Centre segment by 7.5 per cent to € 5.7m. EBIT increased by 3.6 per cent to € 392.6m. The improved participation result of VNG was essentially a key reason for the increase.

Number of staff members up by around 10 per cent
The EWE Group employed an average of 4,693 staff members in 2007. The number of staff members increased by 417 or 9.8 per cent against 2006. At the end of 2007 there were 277 young people working as apprentices at EWE.

Dividend increased
At the Annual General Meeting the Board of Management proposed a dividend of € 65m to the shareholders of EWE AG, the cities and administrative districts of the Ems/Weser/Elbe region (previous year € 60m).

Outlook
Dr. Brinker sees the annual financial statements as the best precondition for the challenges that lie ahead. According to him, the company is in a strong position for negotiations on a strategic partnership and to deal with the challenges of increasing competition and repeated cost regulation. EWE will continue to actively engage in competition and is planning the introduction of new products as well as examining the expansion of sales activities. EWE also anticipates reductions below the industry average with regard to the network fee regulation for 2008. Dr. Brinker did not wish to make any firm statement on energy price developments in 2008. However, according to him, there should be no assumption that demand on world markets will be weaker. “Energy prices will remain at a very high level”, said the CEO of EWE.

The company is continuing to pursue its intention of gaining a foothold in the Electricity Production segment in order to achieve greater independence. In the current year, the company expects to press ahead with two major projects in the Gas Storage segment. The company will also continue on its path towards stronger internationalisation. The focus here is on the growth market of Turkey, where the Group already has a strong presence with EWE Enerji A.S.

In the ICT segment, EWE is planning to further interlock the Telecommunications and Information Technology sub-segments. Due to ever-increasing competition in the Telecommunications segment, even closer cooperation between the individual subsidiaries is planned in order to safeguard the good competitive position in the regions.

EWE currently anticipates a slight increase in sales with a slight decrease in EBIT for 2008. With growth rates that are expected to continue at double digits, the ICT segment will be a growth driver.

	2007	2006	Change %
Group
Sales	€ 4,656.2m	€ 4,139.5m	12.5
EBIT	€ 442.9m	€ 466.0m	-5.0
Annual net profit	€ 299.2m	€ 267.9m	11.7
Dividend per nom. 5 € share capital	€ 1.625	€ 1.500	8.3
Staff members	4,693	4,276	9.8
Apprentices	277	226	226
Energy Segment
Natural gas sales	37,618 million kWh	40,128 million kWh	-6.3
Electricity sales	14,323 million kWh	13,585 million kWh	5.4
Sales	€ 3,493.6m	€ 3,251.8m	7.4
EBIT	€ 135,7m	176,2 Mio. €	25.7
Network segment
Sales	€ 1,540.3m	€ 1,441.2m	6.9
EBIT	€ 135.7m	€ 176.2m	-23.0
ICT segment
Sales	€ 550.3m	€ 439.9m	25.1
EBIT	€ 42.8m	€ 33.8m	26.6
Corporate centre segment
Sales	€ 5.7m	€ 5.3m	7.5
EBIT	€ 392.6m	€ 379.1m	3.6

EWE, headquartered in Oldenburg, is one of Germany’s largest utility companies. Its range of goods and services includes electricity, gas and water supplies, energy and environmental technology, gas transportation and trading, and telecommunications and information technology. Thus, EWE provides a range of classical and innovative services at one source. EWE’s network infrastructure is characterized by a high level of technical quality, security of supplies and economically efficient operation. EWE extended its core competences at an early stage to include the operation of complex networks and provide comprehensive control and telecontrol engineering know-how in a future-oriented, multi-service offering. In addition to its established business activities in northern Germany, EWE also conducts business successfully in eastern Germany, Poland and Turkey. The EWE Group employs circa 4,700 staff members and recorded sales of € 4.7 bn in 2007.

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