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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------
SCHEDULE TO
(Rule 14d-100)
Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934.
Powergen plc
(Name of Subject Company)
E.ON AG
(Name of Filing Person (Offeror))
Ordinary Shares of 50p each,
and
American Depositary Shares evidenced by American Depositary Receipts, each
American Depositary Share evidencing Ordinary Shares of 50p each
(Title of Class of Securities)
G7203R 178, 7389054054
(CUSIP Numbers of Class of Securities)
Michael C. Wilhelm
E.ON AG
Benningsenplatz 1
40474 Dusseldorf
Germany
011 49 211 4579 200
Copies to:
Edward F. Greene
Cleary, Gottlieb, Steen & Hamilton
City Place House
55 Basinghall Street
London EC2V 5EH
England
011 44 20 7614 2200
(Name, Address and Telephone Numbers of Persons
Authorized to Receive Notices and Communications on Behalf of Filing Persons)
---------------------------------
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
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THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO PURCHASE OR A SOLICITATION OF AN
OFFER TO SELL ANY SECURITIES. IF AND WHEN E.ON COMMENCES ITS OFFER FOR ORDINARY
SHARES OR ANY OTHER SECURITIES OF POWERGEN, IT WILL FILE A TENDER OFFER
STATEMENT WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND POWERGEN WILL
FILE A SOLICITATION/RECOMMENDATION STATEMENT WITH RESPECT TO THE OFFER. THE
TENDER OFFER STATEMENT (INCLUDING AN OFFER TO PURCHASE, LETTER OF TRANSMITTAL
AND RELATED TENDER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL
CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER. THESE DOCUMENTS WILL BE MADE AVAILABLE TO ALL
HOLDERS OF RELEVANT POWERGEN SECURITIES AT NO EXPENSE TO THEM. THE TENDER OFFER
STATEMENT (INCLUDING THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL
AND ALL OTHER OFFER DOCUMENTS FILED WITH THE SEC) AND THE SOLICITATION/
RECOMMENDATION STATEMENT ALSO WILL BE AVAILABLE FREE OF CHARGE AT THE SEC
WEBSITE AT WWW.SEC.GOV.
This document contains certain statements that are neither reported financial
results nor other historical information. These statements are forward-looking
statements within the meaning of the safe-harbor provisions of the U.S. federal
securities laws. Because these forward-looking statements are subject to risks
and uncertainties, actual future results may differ materially from those
expressed in or implied by the statements. Many of these risks and uncertainties
relate to factors that are beyond the companies' ability to control or estimate
precisely, such as future market conditions, currency fluctuations, the behavior
of other market participants, the actions of governmental regulators and other
risk factors detailed in E.ON's and Powergen's filings with the SEC. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this document. The companies do not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this document.
On August 16, 2001, E.ON held a teleconference to discuss its interim financial
results for the period from January 1, 2001 to June 30, 2001. The following is a
transcript of remarks made during the teleconference, regarding the status of
the regulatory approval process related to E.ON's pre-conditional offer for
Powergen.
Telephone Conference
August 16, 2001
Speech by Kiran Bhojani
Thank you Erhard.
At this time, we would like to make some brief comments regarding the regulatory
process related to our pre-conditional offer for Powergen.
Due to the numerous questions in the past few weeks pertaining to the regulatory
status of this transaction, we would like to update you as follows:
Kentucky
As far as Kentucky is concerned, the Kentucky Public Service Commission (PSC)
has approved the acquisition by E.ON AG of Louisville Gas and Electric Company
(LG&E), Kentucky Utilities Company (KU) and Powergen.
The approval issued by PSC requires us to honor many of the same conditions
under which the merger with Powergen was approved in May 2000. The deadline for
our response was Monday August 8th . We have accepted the order of PSC, but
there still needs to be clarification on a few details.
Virginia & FERC
Regarding Virginia and FERC (Federal Energy Regulatory Commission) - both
applications were filed on June 12th and we expect to receive the approvals from
the respective authorities by mid October. In both filings we do not expect any
public hearings. We have not received any extensive data requests from both
authorities and we do not expect any intervention from third parties.
Hart-Scott-Rodino (Equivalent to Cartel Authorities)
We will file this document during the month of August and expect the waiting
period to end sometime by the end of September.
SEC
The SEC has already received a draft of the Form U1 filing to be made by us
under PUHCA two weeks ago. We will make our formal filing within the next few
weeks. We expect the issue of public notice by the SEC in the middle of October
and the full approval by the end of this year.
EU
In the case of the EU filings, we expect to file these documents in the next few
weeks and the approval one month after filing.
OFGEM
As far as OFGEM (Office for Gas and Electricity Market) is concerned, there is
no filing necessary. It is only a formal requirement that requires Powergen to
ask for clarification that nothing changes regarding Powergen's customer rates
in the UK market. Clearence from OFGEM will be requested after the EU approval.
Final Closing
After all of these approvals have been cleared, under the UK takeover code there
is a maximum period of 109 days for the transaction to be fully completed.
E.ON may, however, elect with Powergen's consent to implement the transaction by
a Scheme of Arrangement which is a UK legal procedure involving a shareholders'
meeting and the consent of the UK court to transfer ownership of Powergen to
E.ON. The timing of a Scheme of Arrangement depends, among other things, on
court hearing dates but it could take around 8 to 10 week to implement. We
expect to make a final decision on the offer structure around the end of the
year.
To Summarize:
With the exception of the SEC approval under PUHCA (where the approval is
expected by end-of-year), all other regulatory approvals in the US as well as in
Europe are expected to be received latest by the end of October.
This concludes my remarks on the regulatory approvals. Please understand that we
cannot make any further comments on the approval process of Powergen for legal
reasons.
Now Dr. Schipporeit and I are happy to answer all your questions.
The following is a copy of E.ON's Interim Report for the period from January 1,
2001 to June 30, 2001, which E.ON is filing with the SEC under cover of
Form 6-K. Section V of the Interim Report discusses the status of certain
regulatory approvals sought in connection with E.ON's pre-conditional offer for
Powergen.
E.ON Logo
Interim Report
January 1 - June 30, 2001
o Turnaround in Energy Division's internal operating profit
o Group internal operating profit up sharply
o BP transaction accelerates E.ON's focus on core energy business
o E.ON continues to expect markedly improved Group internal operating profit
for full-year 2001
I Group Performance
Note: Under U.S. GAAP, the date of the VEBA-VIAG merger's entry into the
Commercial Register determines the inclusion of the former VIAG in E.ON's
Consolidated Financial Statements. For this reason, the companies of the former
VEBA contributed full twelve-month figures to the 2000 financial year. The
companies of the former VIAG contributed figures for the period July through
December 2000 only. We have calculated pro-forma figures for 2000 in accordance
with U.S. GAAP in order to enable a comparison of the Company's performance in
2000 and 2001. The pro-forma figures depict the E.ON Group as if the VEBA-VIAG
merger had been consummated on January 1, 2000.
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E.ON Group financial highlights
First half pro forma* +/-
%
Euro in millions 2001 2000
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Sales 44,535 46,192 - 4
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Internal operating profit 1,964 1,294 +52
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Results from ordinary business activities 2,035 6,001 - 66
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Group net income 832 3,169 - 74
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Investments 5,722 5,064 + 13
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Cash flow from operating activities 2,285 1,737 + 32
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Employees at end of 1H01 and 2000 195,252 186,788 + 5
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Earnings per share (in Euro) 1.22 4.35 - 72
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*Pro-forma figures for 2000 depict the E.ON Group as if the VEBA-VIAG merger had
been consummated on January 1, 2000.
Group internal operating profit surged 52 percent year-on-year in the first half
of 2001. This sharp increase results primarily from the successful
portfolio-slimming measures at our Telecommunications Division. In addition,
VEBA Oel, Viterra, Stinnes, and VAW aluminium posted markedly higher earnings.
Our Energy Division's internal operating profit experienced a turnaround. For
the first time since energy market liberalization, Energy's earnings topped the
year-earlier figure.
In the first six months of 2001 the Group amortized goodwill totaling Euro 371
million compared with Euro 517 million during the same period last year.
As anticipated, results from ordinary business activities fell 66 percent
year-on-year to Euro 2,035 million. The year-earlier number included gains from
the disposition of our telecoms shareholdings, E-Plus (Euro 3.5 billion) and
Cablecom (Euro 0.8 billion), the main reason for the significant decline. The
figure for the first half of 2001 contains comparatively few extraordinary items
and chiefly reflects the net book gains from the sale of VIAG Interkom (Euro 110
million) and from the disposal of Bewag and HEW (Euro 102 million).
Restructuring and cost-management expenses primarily impacted ASTA Medica and
MEMC. Other nonoperating earnings principally reflect the costs stemming from
the merger of Degussa-Huls and SKW Trostberg to form the new Degussa. This item
also includes our additional contribution to Remembrance, Responsibility, and
the Future, the German industry foundation, and exceptional provisions for
damages arising from former mining activities.
Income taxes declined markedly to Euro 1,155 million. The Company's tax rate
climbed to 57 percent from 43 percent a year ago. The higher rate results from
an increase in the valuation allowance related to deferred tax assets at MEMC in
the amount of Euro 297 million.
The above-mentioned factors reduced Group net income after taxes and minority
interests 74 percent year-on-year to Euro 832 million and earnings per share 72
percent to Euro 1.22.
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First half pro forma
Euro in millions 2001 2000 +/- %
Group internal operating profit
1,964 1,294 + 52
Net book gains
193 4,557 - 96
Cost-management and restructuring expenses
- 97 - 107 + 9
Other nonoperating earnings
- 288 33 -
Foreign E&P taxes
263 224 + 17
Results from ordinary business activities 2,035 6,001 - 66
Income taxes
- 1,155 - 2,555 + 55
Minority interests
- 46 - 277 + 83
Earnings resulting from first-time application
of SFAS 133 - 2 - -
Group net income 832 3,169 - 74
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II Performance by Division
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Group sales
pro forma +/-
First half 2001 2000 %
Euro in millions
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Energy 8,774 6,434 + 36
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Chemicals 10,559 9,751 + 8
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Other Activities 25,556 29,185 - 12
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E.ON AG/other/consolidation - 354 822 -
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Group external sales 44,535 46,192 - 4
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Group internal operating profit
pro forma +/-
First half 2001 2000 %
Euro in millions
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Energy 984 949 + 4
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Chemicals 288 360 - 20
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Other Activities* 380 56 + 579
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E.ON AG/other/consolidation* 312 - 71 -
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Group internal operating profit 1,964 1,294 + 52
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*To enhance the transparency of segment earnings, interest income resulting from
the disposal of E-Plus, Cablecom, Orange Communications, and VIAG Interkom
is reported under E.ON/other/consolidation. The figures for the year-earlier
span were adjusted accordingly.
Energy
------
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Energy pro forma
First half +/-
Euro in millions 2001 2000 %
Sales 8,774 6,434 + 36
Electricity 6,107 5,039 + 21
- thereof: electricity tax 285 109 + 161
Natural gas 1,310 762 + 72
Water 110 109 + 1
Other 1,247 524 + 138
Internal operating profit 984 949 + 4
Investments 2,944 1,849 + 59
- thereof: property, plant, and equipment 475 344 + 38
- thereof: financial assets 2,469 1,505 + 64
Production/sales volume kWh in kWh in
millions millions
Power supplied 140,424 110,468 + 27
Power generated 69,176 61,112 + 13
Natural gas sales volume 43,903 39,439 + 11
Water sales volume (million cubed) 126,9 128,9 - 2
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Our Energy Division supplied roughly 30 billion kilowatt-hours (kWh) or 27
percent more power compared with the year-earlier figure. Primary contributors
to the increase were considerably higher commodity trading volumes as well as
Sydkraft, the Swedish utility that has been fully consolidated since May 1,
2001. Slightly more power was supplied to standard-rate and residential
customers, regional utilities as well as industrial and commercial customers.
Preliminary estimates for the first six months of 2001 indicate that electricity
consumption from Germany's public grid increased 2 percent compared with a 3
percent increase for the year-earlier period.
The Energy Division met around 47 percent of its power requirements with
electricity from its own generation fleet compared with 55 percent in the first
half of last year. At 76.8 billion kWh, roughly 53 percent more power was
purchased from other suppliers (including trading). This lifted the share of
power procured from outside sources during first-half 2001 to 53 percent against
45 percent a year ago.
The uptick in natural gas sales volume resulted mainly from the first-time
inclusion of HEIN GAS Hamburger Gaswerke (HGW) beginning on June 1, 2001. In
addition, E.ON Energie reported weather-related consumption increases among
residential customers and small businesses. Water sales volume was nearly on par
with the figure from the first half of 2000.
In the first six months of 2001, E.ON Energie's sales distinctly surpassed the
year-earlier figure due to markedly higher sales volumes, the modest recovery in
power prices, and the full consolidation of Sydkraft. For the first time since
energy market liberalization, our Energy Division's internal operating profit
increased year-on-year. Efficiency-boosting measures, slightly firmer
electricity prices, and higher sales volumes more than offset the increased fuel
costs related to Germany's Renewable Energy and Co-Generation Protection Laws.
Our new Sydkraft subsidiary also contributed to the earnings improvement.
Chemicals
---------
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Chemicals pro forma +/-
First half %
Euro in millions 2001 2000
Sales 10,559 9,751 + 8
Internal operating profit 288 360 - 20
Investments 1,656 712 + 133
- thereof: property, plant, and equipment 690 570 + 21
- thereof: financial assets 966 142 + 580
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Our Chemicals Division's business environment deteriorated further in the second
quarter of 2001. In North America there is no sign of a turnaround in that
region's distinctly sluggish economy. In Europe--and particularly in
Germany--economic growth has slackened more than initially anticipated. Prices
for important raw materials continue to be high. In this climate, Degussa
further boosted sales. Excluding precious metals trading, Degussa's sales
revenues rose 7 percent year-on-year to Euro 8.7 billion; adjusted for changes
in Degussa's scope of consolidation, sales were up 8 percent.
At Euro 288 million, Degussa's internal operating profit declined 20 percent
from the very high year-earlier number. In addition to the economic slowdown,
earnings were also impaired by high raw material costs as well as by markedly
increased interest expenses and goodwill amortization stemming from the
acquisition of Laporte. Degussa's Health & Nutrition, Specialty Polymers,
Construction Chemicals, and Coatings & Advanced Fillers divisions posted higher
earnings, whereas Fine & Industrial Chemicals and Performance Chemicals reported
earnings declines.
Other Activities
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Oil
First half +/-
Euro in millions 2001 2000 %
Sales 13,710 13,410 + 2
- thereof: petroleum tax 4,443 4,691 - 5
Internal operating profit 189 34 + 456
Investments 235 1,277 - 82
- thereof: property, plant, and equipment 218 293 - 26
- thereof: financial assets 17 984 - 98
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In the wake of portfolio slimming measures, in the first half of 2001 our Oil
Division's crude oil production fell 9 percent to 23.8 million barrels and its
natural gas production declined 1 percent to 561 million cubic meters.
Production startup at a new field in the Dutch North Sea nearly offset the
decline in natural gas production. The sales volume of petroleum products
slipped 8 percent to 17.8 million tons primarily because of slower business
outside Germany. The sales volume of petrochemical products declined 9 percent
to 2.4 million tons.
Despite lower sales volumes, VEBA Oel's sales rose slightly owing to higher
product prices. The improvement in internal operating profit is mainly the
result of higher refining margins as well as cost reductions. In addition,
service station margins improved again. At $23.4 per ton, the average Rotterdam
refining margin was up $3.1 per ton compared with the figure for the first six
months of last year. The average crude oil price was $26.6 per barrel against
$26.8 per barrel for the year-earlier period.
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Real Estate
First half +/-
Euro in millions 2001 2000 %
Sales 588 573 + 3
Internal operating profit 54 35 + 54
Investments 56 72 - 22
- thereof: property, plant, and equipment 48 51 - 6
- thereof: financial assets 8 21 - 62
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In our Real Estate Division, Viterra generated 3 percent higher sales. The
expansion of Energy Services and increased rental income at the Commercial
division were chiefly responsible for the uptick. Residential Investment sold
additional housing units late last year, which led to this division's reporting
lower rental revenue than in first-half 2000.
Viterra's internal operating profit climbed 54 percent to Euro 54 million.
Residential Services posted a large earnings increase resulting in particular
from Energy Services' business expansion.
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Telecommunications pro forma
First half +/-
Euro in millions 2001 2000 %
Sales 261 156 + 67
Internal operating profit* - 86 - 430 + 80
Investments 134 602 - 78
- thereof: property, plant, and equipment 134 151 - 11
- thereof: financial assets - 1 -
================================================================================
*To enhance the transparency of segment earnings, interest income resulting from
the disposal of E-Plus, Cablecom, Orange Communications, and VIAG Interkom
is reported under E.ON/other/consolidation. The figures for the year-earlier
span were adjusted accordingly.
The improvement in Telecommunications' internal operating profit stems
principally from the divestment of VIAG Interkom and Orange Communications and
the related elimination of operating losses. In addition, the Company's
remaining telecoms shareholdings--ONE in Austria and Bouygues Telecom in
France--showed operating improvements. The key factors were higher sales
revenues and lower customer acquisition costs at both companies. Beginning in
early 2001, the vigorous growth of Austria's mobile phone market began to
slacken. At the end of June 2001, ONE had 1,260,000 cellular phone subscribers
or 20 percent of the Austrian market.
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Distribution/Logistics pro forma
First half +/-
Euro in millions 2001 2000 %
Sales 8,672 12,933 - 33
Internal operating profit 166 341 - 51
Investments 151 257 - 41
- thereof: property, plant, and equipment 139 155 - 10
- thereof: financial assets 12 102 - 88
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For first-half 2001, our Distribution/Logistics Division comprises only Stinnes
and Klockner & Co. The year-earlier figures include the electronics operations
we sold in fall 2000. This is the reason why Distribution/Logistics reported
appreciably lower sales and internal operating profit for the first six months
of 2001.
Stinnes's first-half sales were slightly above the year-earlier figure. Adjusted
for the building materials operations sold in mid-year 2000, Stinnes generated
markedly higher sales revenues. This stems from the positive development at
Stinnes's Transportation and Chemicals divisions as well as from the first-time
consolidation of Holland Chemical International, which Stinnes acquired late
last year. Internal operating profit substantially exceeded the prior year's
figure. The improvement results from the solid performances put in by the
Transportation and Chemicals divisions.
Klockner & Co's sales declined due to the disposal of its trading business. On a
like-for-like basis, first-half 2001 sales revenues in Klockner's materials
warehousing business were largely unchanged from the same period a year ago.
Lower steel prices and weaker demand were chiefly responsible for the decline in
internal operating profit. These developments particularly impacted Klockner's
operations in Germany, Spain, and the U.S.
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Aluminum pro forma
First half +/-
Euro in millions 2001 2000 %
Sales 1,906 1,702 + 12
Internal operating profit 162 138 + 17
Investments 133 78 + 71
- thereof: property, plant, and equipment 124 71 + 75
- thereof: financial assets 9 7 + 29
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In the first six months of 2001, our Aluminum Division (VAW aluminium) operated
in a satisfactory business climate. Aluminum consumption failed to decline for
the first time since the middle of last year. Although aluminum prices in the
second quarter of 2001 were down quarter-on-quarter, at $1,540 per ton they
remained historically high owing to continued production cuts. The first-time
consolidation of Australia's Kurri Kurri smelter and the strong dollar
represented additional positive factors. VAW aluminium grew sales 12 percent and
internal operating profit 17 percent.
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Silicon Wafers
First half +/-
Euro in millions 2001 2000 %
Sales 419 411 + 2
Internal operating profit - 105 - 62 - 69
Investments 30 23 + 30
- thereof: property, plant, and equipment 30 23 + 30
- thereof: financial assets - - -
================================================================================
Like many companies in the semiconductor and wafer sectors, MEMC's development
reflects its dramatically deteriorated market environment. Owing to currency
effects, our wafer subsidiary's sales for the first six months of 2001 were up
slightly compared with last year's figure. But excluding South Korea's MEMC
Korea Company, which has been consolidated since the fourth quarter of 2000,
MEMC's first-half sales revenues were down markedly. The company's operating
loss was significantly larger. MEMC has therefore continued its vigorous efforts
to improve the company's cost structure. These measures include closing a wafer
production facility in Texas, reducing staff, and instituting temporary
production stoppages. Owing to its tight earnings and liquidity situation, MEMC
increased its valuation allowance related to deferred tax assets.
III Employees
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Employees June 30, 2001 Dec. 31, 2000 %
Energy 41,314 34,406 + 20
Chemicals 63,206 62,110 + 2
Other Activities 90,086 89,613 + 1
E.ON AG/other 646 659 - 2
Total 195,252 186,788 + 5
================================================================================
The E.ON Group employed 195,252 people worldwide at the end of June 2001. This
represents an increase of roughly 5 percent versus year-end 2000 and reflects
major acquisitions at our Energy and Chemicals Divisions.
The number of employees at our Energy Division rose by around 7,000 due to the
acquisition of a majority stake in Sweden's Sydkraft and the takeover of HGW.
The purchase of Laporte, a fine chemicals enterprise based in the U.K., added
roughly 1,100 employees to our Chemicals Division. At Distribution/Logistics,
Stinnes's staff increased by more than 1,000 owing to the first-time
consolidation of several operations outside Germany. By contrast, ongoing
restructuring measures led to staff reductions at a number of other Group
companies, chiefly at VEBA Oel.
Expenses for wages and salaries including social security contributions amounted
to about Euro 5.13 billion compared with Euro 5.34 billion in the year-earlier
period.
IV Investments
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Investments 2001 pro forma 2000
--------------------------------------
First half % %
Euro in millions
Energy 2,944 51 1,849 36
Chemicals 1,656 29 712 14
Other Activities 739 13 2,309 46
E.ON AG/other/consolidation 383 7 194 4
Total 5,722 100 5,064 100
================================================================================
In the first six months of 2001, the E.ON Group's investments totaled Euro 5.7
billion--up 13 percent year-on-year. Spending on fixed and intangible assets
rose 2 percent to Euro 1.9 billion. Investments in financial assets climbed 19
percent to Euro 3.8 billion.
At our Energy Division, investments surpassed the year-earlier figure by 59
percent. Major investments in first-half 2001 included the increased
stockholding at Sydkraft as well as the acquisition of shares in
Elektrizitatswerk Minden-Ravensberg and in ESWE Versorgungs AG (formerly
Stadtwerke Wiesbaden). Chemicals' capital expenditures rose considerably owing
to the takeover of Laporte, the U.K.-based fine chemicals company. Investments
by our Other Activities declined appreciably. The exceptionally high
year-earlier number reflects our Oil Division's acquisition of Mobil Oil's Aral
interest.
V Highlights
As part of its ongoing focus on specialty chemicals, in late May Degussa sold
its dental unit for about Euro 576 million to Dentsply of the U.S. The disposal
still requires antitrust approval from the EU.
In a first step toward exiting the pharmaceuticals business, in June Degussa
sold AWD Pharma, part of its ASTA Medica subsidiary, for around Euro 50 million
to Pliva, a Croatian pharmaceuticals enterprise. It is expected that the
transaction will be completed during the third quarter of this year.
In July Degussa sold the former SKW Trostberg's marketing operations for
potassium chloride and sodium dicyanogen to Oxon Italia. This deal marks the
completion of the commitments made to the EU Commission stemming from the merger
of VEBA and VIAG to form E.ON.
In early August Degussa sold ASTA Medica's oncology business for Euro 525
million to Switzerland's Baxter Healthcare, a subsidiary of U.S.-based Baxter
International. The transaction is subject to antitrust approval in Germany and
the U.S. and is expected to be completed by the end of the year at the latest.
In July E.ON Energie and Austria's Verbund reached an Agreement in Principle to
form a joint hydroelectric venture. The company, European Hydro Power, will
comprise all the two companies' hydroelectric activities. Plans call for the new
entity to begin operations on January 1, 2002. The company's roughly 200
hydroelectric plants with a total installed capacity of around 9,600 megawatts
will make it Europe's third-largest hydroelectric generator. The agreement is
subject to Supervisory Board and antitrust approval.
E.ON and BP reached an agreement in July to restructure their oil and gas
activities in Germany. Around the turn of the year 2001/2002, E.ON will acquire
51 percent of Gelsenberg, a BP subsidiary, as part of a capital increase.
Gelsenberg holds 25.5 percent of Ruhrgas. Beginning in January 2002, BP has the
option to sell its remaining 49 percent interest in Gelsenberg to E.ON. Also at
the turn of the year, BP will acquire 51 percent of VEBA Oel as part of a
capital increase and redeem shareholder loans granted by E.ON to VEBA Oel
totaling around Euro 1.9 billion. Starting in April 2002, E.ON can exercise a
put option to sell its remaining 49 percent VEBA Oel interest to BP. The
transactions are subject to antitrust approval.
In early August the Commonwealth of Kentucky gave its approval in principle to
E.ON's indirect acquisition of LG&E Energy, the Kentucky-based energy utility; a
number of details must still be resolved with the Kentucky Public Service
Commission. In addition, we began the process of applying for the necessary
consents from the U.S. Securities and Exchange Commission under the Public
Utilities Holding Company Act. The acquisition is also subject to obtaining
other regulatory approvals in the U.S. and from the European Commission. We
continue to expect that we will fulfill all other pre-conditions by the end of
2001 and complete the transaction as planned in spring 2002.
In early August E.ON sold Duisburg-based Klockner & Co, a wholly owned
subsidiary, to Balli Group of London. E.ON expects to realize a book gain of
around Euro 150 million from the disposal. In late 2000 Balli had acquired
Klockner & Co's chain-of-delivery steel trading business. The divestment of
Klockner & Co represents a further milestone in E.ON's focus on its core energy
business. The transaction is subject to antitrust approval.
VI Outlook
The agreement reached with BP in July to reorganize the two companies' oil and
gas activities was of considerable strategic significance and represents
important progress in our focus and growth strategy. The deal gives us the
unique opportunity to combine, as part of our exclusive focus on energy, the
divestment of VEBA Oel with unprecedented growth in the attractive gas sector,
one of our core businesses. Following the VEBA-VIAG merger and the planned
takeover of Powergen, this transaction represents the third milestone as we
systematically implement our corporate strategy.
We continue to expect Group internal operating profit for full-year 2001 to
markedly surpass the previous year's number, though not at the first-half's high
rate of increase. As anticipated, results from ordinary business activities for
full-year 2001 will come in significantly below the 2000 figure. This is because
we do not expect to post comparable gains from disposals, in part owing to the
tax relief on capital gains that will take effect in Germany in 2002.
At our Energy Division we anticipate that electricity prices will continue to
stabilize and that Energy's internal operating profit for full-year 2001 will be
slightly above the prior-year figure. We also expect an earnings-enhancing
effect from the first-time consolidation of Sydkraft.
In view of the more dramatic-than-anticipated deterioration of the global
economic climate, the chemicals industry is not expected to rally until early
2002. This renders even more important the cost-management measures that Degussa
began implementing at the beginning of the year and the realization of merger
synergies, which the company will continue to implement systematically. Overall,
we expect Chemicals to report a full-year internal operating profit on the level
of the previous year's figure.
Overall, we anticipate that our Other Activities will post a significantly
higher full-year internal operating profit for 2001. We are forecasting MEMC to
report a markedly greater operating loss for full-year 2001 owing to the
dramatic deterioration of the market for silicon wafers. Moreover, we expect to
take considerable one-off charges resulting from our plans to exit this
activity. We anticipate that our Oil Division's full-year internal operating
profit will be on par with the prior year's solid results. We are forecasting
that Klockner & Co's internal operating profit will be lower year-on-year. By
contrast, we expect earnings improvements at our Real Estate and
Telecommunications Divisions as well as at Stinnes and VAW aluminium.
VII Interim Consolidated Financial Statements
E.ON AG and Subsidiaries Consolidated Statements of Income
================================================================================
Second quarter pro forma
Euro in millions 2001 2000
--------------------------------------------------------------------------------
Sales 21,816 23,801
Petroleum and electricity taxes - 2,131 - 2,548
Sales, net of petroleum and electricity taxes 19,685 21,253
Costs of goods sold and services provided - 16,563 - 17,729
--------------------------------------------------------------------------------
Gross profit from sales 3,122 3,524
--------------------------------------------------------------------------------
Selling expenses - 1,809 - 1,668
General and administrative expenses - 695 - 764
Other operating income/expenses - 31 - 261
Financial earnings, net 348 4
--------------------------------------------------------------------------------
Results from ordinary business activities 936 835
--------------------------------------------------------------------------------
Income taxes - 760 - 317
--------------------------------------------------------------------------------
Minority interests 69 - 158
--------------------------------------------------------------------------------
Income before adjustments stemming from first-time
application of SFAS 133 245 360
--------------------------------------------------------------------------------
Adjustments stemming from first-time application
of SFAS 133, after taxes 0 0
--------------------------------------------------------------------------------
Group net income 245 360
================================================================================
Earnings per share (in Euro) 0.37 0.49
================================================================================
E.ON AG and Subsidiaries Consolidated Statements of Income
================================================================================
First half pro forma
Euro in millions 2001 2000
--------------------------------------------------------------------------------
Sales 44,535 46,192
Petroleum and electricity taxes - 4,725 - 4,800
Sales, net of petroleum and electricity taxes 39,810 41,392
Costs of goods sold and services provided - 33,329 - 34,429
--------------------------------------------------------------------------------
Gross profit from sales 6,481 6,963
--------------------------------------------------------------------------------
Selling expenses - 3,414 - 3,351
General and administrative expenses - 1,418 - 1,541
Other operating income/expenses - 345 4,106
Financial earnings, net 420 - 176
--------------------------------------------------------------------------------
Results from ordinary business activities 2,035 6,001
--------------------------------------------------------------------------------
Income taxes - 1,155 - 2,555
--------------------------------------------------------------------------------
Minority interests - 46 - 277
--------------------------------------------------------------------------------
Income before adjustments stemming from first-time
application of SFAS 133 834 3,169
--------------------------------------------------------------------------------
Adjustments stemming from first-time
application of SFAS 133, after taxes - 2 0
--------------------------------------------------------------------------------
Group net income 832 3,169
Earnings per share (in Euro) 1.22 4.35
================================================================================
E.ON AG and Subsidiaries Consolidated Balance Sheet
================================================================================
Euro in millions June 30, 2001 Dec. 31, 2000
--------------------------------------------------------------------------------
Assets
Intangible assets 11,345 9,714
Property, plant, and equipment 35,457 28,844
Financial assets 15,096 24,782
--------------------------------------------------------------------------------
Fixed assets 61,898 63,340
--------------------------------------------------------------------------------
Inventories 7,803 7,166
Receivables, trade 13,470 11,297
Other receivables and assets 13,141 13,443
Businesses held for sale 0 989
Liquid funds 16,634 8,501
--------------------------------------------------------------------------------
Non-fixed assets 51,048 41,396
--------------------------------------------------------------------------------
Deferred taxes 967 1,074
--------------------------------------------------------------------------------
Prepaid expenses 661 405
--------------------------------------------------------------------------------
Total assets 114,574 106,215
Liabilities and stockholders' equity
Stockholders' equity 26,445 28,033
--------------------------------------------------------------------------------
Minority interests 6,335 5,123
--------------------------------------------------------------------------------
Provisions for pensions 9,069 8,736
Other provisions 26,823 24,799
--------------------------------------------------------------------------------
Accrued liabilities 35,892 33,535
--------------------------------------------------------------------------------
Financial liabilities 15,989 14,047
Other liabilities 26,053 21,873
--------------------------------------------------------------------------------
Liabilities 42,042 35,920
--------------------------------------------------------------------------------
Deferred taxes 2,900 2,720
--------------------------------------------------------------------------------
Deferred income 960 884
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity 114,574 106,215
================================================================================
E.ON AG and Subsidiaries Consolidated Statements of Cash Flow
================================================================================
First half pro forma
Euro in millions 2001 2000
--------------------------------------------------------------------------------
Net income 832 3,169
Minority interests 46 277
Adjustments to reconcile net income to cash flow
from operations
Depreciation and amortization 2,286 2,510
Changes in deferred taxes 379 - 392
Changes in provisions 242 323
Other non-cash items
- 353 178
Gains from disposition of fixed assets
- 456 - 4,680
Changes in operating assets and liabilities
- 691 352
--------------------------------------------------------------------------------
Cash provided by (used for) operating activities 2,285 1,737
--------------------------------------------------------------------------------
Proceeds from disposition of:
Financial assets 14,436 1,329
Intangible assets and fixed assets
377 594
Purchase of:
Financial assets - 3,846 - 3,231
Intangible assets and fixed assets
- 1,876 - 1,833
Changes in securities (> 3 months)
- 1,243 1,488
--------------------------------------------------------------------------------
Cash provided by (used for) investing activities 7,848 - 4,629
--------------------------------------------------------------------------------
Payments to acquire E.ON AG shares - 2,369 -
Payment of cash dividends to:
Shareholders of E.ON AG - 954 - 849
Minority interests - 138 - 78
Changes in financial liabilities - 2,143 4,052
--------------------------------------------------------------------------------
Cash provided by (used for) financing activities - 5,604 3,125
--------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (< 3 months) 4,529 233
Effect of foreign exchange rates on cash and cash
equivalents (< 3 months) 36 10
Liquid funds at beginning of period (< 3 months) 1,206 1,166
--------------------------------------------------------------------------------
Liquid funds at end of period (< 3 months) 5,771 1,409
--------------------------------------------------------------------------------
Securities at end of period, other than trading
(> 3 months) 10,863 7,328
--------------------------------------------------------------------------------
Liquid funds as shown on the balance sheet 16,634 8,737
================================================================================
Earnings per share
=====================================================================================================
Second quarter pro forma First half pro forma
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------
Net income Euro in 245 360 832 3,169
millions
-----------------------------------------------------------------------------------------------------
Number of outstanding shares 1,000 675,046 728,048 683,982 728,048
(weighted average) shares
-----------------------------------------------------------------------------------------------------
Earnings per share in Euro 0.37 0.49 1.22 4.35
=====================================================================================================
Notes. By the end of the first half of 2001 we had purchased a total of roughly
56 million E.ON shares as part of our share buyback program approved by E.ON
AG's Supervisory Board on September 22, 2000. This amounts to 7.4 percent of the
Company's capital stock.
The first half of 2001 saw the following changes to E.ON's scope of
consolidation:
o In order to comply with the commitments made during the VEBA-VIAG merger
control process, E.ON Energie reached an asset-swap agreement with
Hamburgische Electricitats-Werke (HEW). E.ON Energie transferred its 49
percent stake in BEWAG, the Berlin-based energy utility, to HEW. In return,
E.ON Energie received a 61.9 percent interest in HGW and a cash payment. HGW
is fully consolidated as of June 1, 2001.
o On February 1, 2001, E.ON Energie acquired additional shares in Sydkraft,
the Malmo-based electric company, from four Swedish municipalities. This
increased E.ON Energie's shareholding to a total of 29.4 percent of
Sydkraft's capital stock and 42.8 percent of the Swedish utility's voting
rights. On February 21, 2001, E.ON Energie tendered Sydkraft's minority
shareholders a takeover offer with a deadline of the end of April. E.ON
Energie now holds 60.6 percent of Sydkraft's capital stock and 65.7 percent
of its voting rights. Sydkraft is fully consolidated as of May 1, 2001.
o On January 15, 2001, Degussa tendered a cash offer of (pound)6.97 per share
to the stockholders of Laporte, the U.K.-based specialty chemicals
enterprise. By the end of June 2001, Degussa had acquired 100 percent of
Laporte's capital stock. Laporte is fully consolidated as of April 1, 2001.
o On January 16, 2001, E.ON exercised the put option to sell its 45 percent
interest in VIAG Interkom. E.ON had reached the option agreement with
British Telecom in August 2000. Beginning February 19, 2001, VIAG Interkom
is no longer included in E.ON's Consolidated Financial Statements.
o To enhance the transparency of segment earnings, interest income stemming
from the disposal of E-Plus, Cablecom, Orange Communications, and VIAG
Interkom is reported under E.ON AG/other/consolidation. The figures for the
year-earlier period were adjusted accordingly.
o In 2001 our Distribution/Logistics Division comprises just Stinnes
(logistics services) and Klockner & Co (metals trading). We sold our
electronics operations in fall 2000 to a consortium of European and American
buyers.
Prior-year figures are pro forma and were calculated on a like-for-like basis.
Additional, actual figures for 2000 are not provided.
The E.ON Group's Consolidated Statements of Cash Flow for the quarter ended
March 31, 2001, require adjustment owing to a classification error in the
Chemicals Division. After the adjustment, "Cash provided by (used for) operating
activities" for the first quarter amounts to Euro 1,009 million; "Cash provided
by (used for) financing activities" amounts to Euro 2,817 million. This
adjustment does not affect the liquid funds as shown on the balance sheet.
The Interim Consolidated Financial Statements were reviewed by our independent
auditors, PwC Deutsche Revision AG Wirtschaftsprufungsgesellschaft, Dusseldorf.
Financial Calendar
November 15, 2001 Interim Report: January - September 2001
March 21, 2002 Annual Press Conference, Analysts' Conference
May 16, 2002 Interim Report: January - March 2002
May 28 2002 Annual Shareholders' Meeting
August 15, 2002 Interim Report: January - June 2002
This Interim Report contains certain forward-looking statements that are subject
to risk and uncertainties. For information identifying economic, currency,
regulatory, technological, competitive, and some other important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, you should refer to E.ON's filings to the Securities
and Exchange Commission (Washington, DC), as updated from time to time, in
particular to the discussion included in the section of E.ON's 2000 Annual
Report on Form 20-F entitled "Item 3. Key Information: Basic Risk Factors."