E.ON AG (ENAKF) 2003年年度報告「OTC」.pdf

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1、2003 Annual Report2003 Annual Report2003387.6803.746,3649,4586,2284,5655,5383,9501,1374,6479,1965,53829,774111,8509.99.516.866,5496.041.740.677.112.0045.39E.ON Group Financial Highlights in millionsElectricity sales volume(in billion kWh)2Gas sales volume(in billion kWh)2SalesEBITDA3EBIT3Internal op

2、erating profit4Income/(loss)from continuing operations before income taxes and minority interestsIncome/(loss)from continuing operationsIncome/(loss)from discontinued operationsNet incomeInvestmentsCash provided by operating activitiesStockholders equityTotal assetsROCE6(in%)Cost of capital(in%)Retu

3、rn on equity after taxes7(in%)Employees at year endEarnings per share from(in)continuing operationsdiscontinued operationscumulative effect of changes in accounting principles,netnet incomePer share(in)Dividend Stockholders equity8+/%+16+11+27+25+34+2066+6762+53+161+0.755.753466+67+14+1520021333.672

4、1.336,6247,5584,6493,8177597203,3062,77724,1593,61425,653113,5039.29.511.1101,3361.105.070.294.261.7539.33 in millionsSalesEBITDAEBITInternal operating profitROCE(in%)Cost of capital(in%)Cash provided by operating activitiesInvestmentsEmployees at year endE.ONEnergie22,5795,7783,8343,05814.39.95,040

5、3,52143,853Ruhrgas12,0851,5301,1691,12810.89.079146310,150Powergen9,8941,5319056205.78.649384210,062Other/Consoli-dation2732593126937954,210597Viterra1,08564345629510.67.61021241,887Degussa9942351761575.510.19336Total46,3649,4586,2284,5659.99.55,5389,19666,549E.ON Group by Business Segment 2003Non-G

6、AAP financial measures:This report contains certain non-GAAP financial measures.Management believes that the non-GAAP financial measures usedby E.ON,when considered in conjunction with(but not in lieu of)other measures that are computed in U.S.GAAP,enhance an understanding of E.ONsresults of operati

7、ons.A number of these non-GAAP financial measures are also commonly used by securities analysts,credit rating agencies,and investorsto evaluate and compare the periodic and future operating performance and value of E.ON and other companies with which E.ON competes.Additionalinformation with respect

8、to each of the non-GAAP financial measures used in this report is included together with the reconciliations described below.E.ON prepares its financial statements in accordance with generally accepted accounting principles in the United States(U.S.GAAP).As noted above,thisreport contains certain fi

9、nancial measures(consolidated internal operating profit,EBIT,EBITDA,ROCE,net financial position,net interest expense,and freecash flow)that are not calculated in accordance with U.S.GAAP and are therefore considered“non-GAAP financial measures”within the meaning of theU.S.federal securities laws.In

10、accordance with applicable rules and regulations,E.ON has presented in this report a reconciliation of each non-GAAP financialmeasure to the most directly comparable U.S.GAAP measure for historical measures and an equivalent U.S.GAAP target for forward-looking measures.Thefootnotes presented with th

11、e relevant historical non-GAAP financial measures indicate the page of this report on which the relevant reconciliation appears.The non-GAAP financial measures used in this report should not be considered in isolation as a measure of E.ONs profitability or liquidity,and should beconsidered in additi

12、on to,rather than as a substitute for,net income,cash provided by operating activities,and the other income or cash flow data preparedin accordance with U.S.GAAP presented in this report and the relevant reconciliations.The non-GAAP financial measures used by E.ON may differ from,andnot be comparabl

13、e to,similarly titled measures used by other companies.E.ON AG:An OverviewFinancial Calendar2004 Annual Shareholders MeetingDividend PaymentInterim Report:JanuaryMarch 2004Interim Report:JanuaryJune 2004Interim Report:JanuarySeptember 2004Annual Press Conference,Release of 2004 Annual ReportAnnual A

14、nalysts Conference2005 Annual Shareholders MeetingApril 28,2004April 29,2004May 13,2004August 12,2004November 11,2004March 10,2005March 10,2005April 27,2005ontop1Adjusted for discontinued operations(see commentary on pages 133141).2Unconsolidated and prior-year figures include pro-forma figures for

15、Ruhrgasand Powergen.3Non-GAAP financial measure;see reconciliation to internal operating profit on pages 112113.4Non-GAAP financial measure;see reconciliationto net income on page 36.5Change in percentage points.6Non-GAAP financial measure;see derivation on pages 5557.7Net income excluding minorityi

16、nterestsstockholders equity excluding minority interests.8Excludes minority interests.2003 Annual Report2003 Annual Report2003387.6803.746,3649,4586,2284,5655,5383,9501,1374,6479,1965,53829,774111,8509.99.516.866,5496.041.740.677.112.0045.39E.ON Group Financial Highlights in millionsElectricity sale

17、s volume(in billion kWh)2Gas sales volume(in billion kWh)2SalesEBITDA3EBIT3Internal operating profit4Income/(loss)from continuing operations before income taxes and minority interestsIncome/(loss)from continuing operationsIncome/(loss)from discontinued operationsNet incomeInvestmentsCash provided by

18、 operating activitiesStockholders equityTotal assetsROCE6(in%)Cost of capital(in%)Return on equity after taxes7(in%)Employees at year endEarnings per share from(in)continuing operationsdiscontinued operationscumulative effect of changes in accounting principles,netnet incomePer share(in)Dividend Sto

19、ckholders equity8+/%+16+11+27+25+34+2066+6762+53+161+0.755.753466+67+14+1520021333.6721.336,6247,5584,6493,8177597203,3062,77724,1593,61425,653113,5039.29.511.1101,3361.105.070.294.261.7539.33 in millionsSalesEBITDAEBITInternal operating profitROCE(in%)Cost of capital(in%)Cash provided by operating

20、activitiesInvestmentsEmployees at year endE.ONEnergie22,5795,7783,8343,05814.39.95,0403,52143,853Ruhrgas12,0851,5301,1691,12810.89.079146310,150Powergen9,8941,5319056205.78.649384210,062Other/Consoli-dation2732593126937954,210597Viterra1,08564345629510.67.61021241,887Degussa9942351761575.510.19336To

21、tal46,3649,4586,2284,5659.99.55,5389,19666,549E.ON Group by Business Segment 2003Non-GAAP financial measures:This report contains certain non-GAAP financial measures.Management believes that the non-GAAP financial measures usedby E.ON,when considered in conjunction with(but not in lieu of)other meas

22、ures that are computed in U.S.GAAP,enhance an understanding of E.ONsresults of operations.A number of these non-GAAP financial measures are also commonly used by securities analysts,credit rating agencies,and investorsto evaluate and compare the periodic and future operating performance and value of

23、 E.ON and other companies with which E.ON competes.Additionalinformation with respect to each of the non-GAAP financial measures used in this report is included together with the reconciliations described below.E.ON prepares its financial statements in accordance with generally accepted accounting p

24、rinciples in the United States(U.S.GAAP).As noted above,thisreport contains certain financial measures(consolidated internal operating profit,EBIT,EBITDA,ROCE,net financial position,net interest expense,and freecash flow)that are not calculated in accordance with U.S.GAAP and are therefore considere

25、d“non-GAAP financial measures”within the meaning of theU.S.federal securities laws.In accordance with applicable rules and regulations,E.ON has presented in this report a reconciliation of each non-GAAP financialmeasure to the most directly comparable U.S.GAAP measure for historical measures and an

26、equivalent U.S.GAAP target for forward-looking measures.Thefootnotes presented with the relevant historical non-GAAP financial measures indicate the page of this report on which the relevant reconciliation appears.The non-GAAP financial measures used in this report should not be considered in isolat

27、ion as a measure of E.ONs profitability or liquidity,and should beconsidered in addition to,rather than as a substitute for,net income,cash provided by operating activities,and the other income or cash flow data preparedin accordance with U.S.GAAP presented in this report and the relevant reconcilia

28、tions.The non-GAAP financial measures used by E.ON may differ from,andnot be comparable to,similarly titled measures used by other companies.E.ON AG:An OverviewFinancial Calendar2004 Annual Shareholders MeetingDividend PaymentInterim Report:JanuaryMarch 2004Interim Report:JanuaryJune 2004Interim Rep

29、ort:JanuarySeptember 2004Annual Press Conference,Release of 2004 Annual ReportAnnual Analysts Conference2005 Annual Shareholders MeetingApril 28,2004April 29,2004May 13,2004August 12,2004November 11,2004March 10,2005March 10,2005April 27,2005ontop1Adjusted for discontinued operations(see commentary

30、on pages 133141).2Unconsolidated and prior-year figures include pro-forma figures for Ruhrgasand Powergen.3Non-GAAP financial measure;see reconciliation to internal operating profit on pages 112113.4Non-GAAP financial measure;see reconciliationto net income on page 36.5Change in percentage points.6N

31、on-GAAP financial measure;see derivation on pages 5557.7Net income excluding minorityinterestsstockholders equity excluding minority interests.8Excludes minority interests.Art direction:Photography:Production:Typesetting&lithography:Printing:LesmoMarkus AltmannMichael Dannenmann(pages 4 and 8)Albrec

32、ht Fuchs(page 10)Christian Schlter(page 14)Jung Produktion,DsseldorfLettern Partners,DsseldorfDruckpartner,EssenEON AG:An OverviewAs of February 2004Corporate CenterE.ON AGDsseldorfWestern Kentucky Energy Corp.,Henderson,USA 100%LG&E Power Inc.,Louisville,USA 100%LG&E Energy Marketing Inc.,Louisvill

33、e,USA 100%Central Europe market unit E.ON Energie AG,Munich,Germany100%E.ON Energie ranks among Europes largest energy services providers andhas operations in Germany and in nine other European countries,includingThe Netherlands,Hungary,Slovakia,the Czech Republic,Switzerland,Italy,and Poland.Pan-Eu

34、ropean Gas market unit U.K.market unit Nordic market unit U.S.Midwest market unit Other ActivitiesE.ON Kraftwerke GmbH,Hanover100%E.ON Kernkraft GmbH,Hanover100%E.ON Wasserkraft GmbH,Landshut 100%E.ON Netz GmbH,Bayreuth 100%E.ON Sales&Trading GmbH,Munich 100%E.ON Bayern AG,Regensburg 98.9%Avacon AG,

35、Helmstedt 56.5%E.ON Hanse AG,Quickborn 73.8%EAM Energie AG,Kassel 73.3%E.DIS AG,Frstenwalde an der Spree71%Teag Thringer Energie AG,Erfurt 72.7%E.ON Westfalen Weser AG,Paderborn 62.8%E.ON Benelux N.V.,The Hague,Netherlands100%E.ON Hungria Rt.,Hungary 100%Dl-dunntli ramszolgltat Rt.,Pcs,Hungary92.4%T

36、iszntli ramszolgltat Rt.,Debrecen,Hungary92.4%szak-dunntli ramszolgltat Rt.,Gyr,Hungary9.6%BKW FMB Energie AG,Bern,Switzerland20%E.ON Czech Holding AG,Munich,Germany100%Jihocesk energetik a.s.,Cesk Budjovice,Czech Republic84.7%Jihomoravsk energetik a.s.,Brno,Czech Republic85.7%Zpadoslovensk energeti

37、ka a.s.,Bratislava,Slovakia49%Ruhrgas AG,Essen,Germany100%With annual sales of approximately 600 billion kilowatt-hours of naturalgas,Ruhrgas is one of Europes premier gas companies and among theworlds biggest natural gas importers.The companys customers includeregional and municipal energy utilitie

38、s and industrial enterprises.Powergen UK plc,London,United Kingdom100%Headquartered in Coventry,Powergen is one of the United Kingdoms leadingintegrated energy utilities,providing power and gas service to approximately8.6 million customer accounts.E.ON Nordic AB,Malm,Sweden100%Sydkraft manages our e

39、nergy operations in Northern Europe.Through itsmore than 60 subsidiaries,Sydkraft generates,distributes,markets,anddelivers electricity and gas.LG&E Energy LLC,Louisville,United States100%Louisville-based LG&E Energy is a diversified energy services provider.Itsoperations are focused primarily on th

40、e regulated electric and gas utilitysector in Kentucky.Viterra AG,Essen,Germany100%Viterra is a growth-oriented real estate company focusing on its profitableresidential real estate business.Viterra is Germanys leader in the rentaland trading of housing units.The company also develops attractively l

41、ocatedoffice and apartment buildings.Degussa AG,Dsseldorf,Germany46.5%Degussa is Germanys third-largest chemicals company and the worldsbiggest specialty chemicals enterprise.Degussa is arrayed in market-orientedoperating segments:Construction Chemicals,Fine&Industrial Chemicals,Performance Chemical

42、s,Coatings&Advanced Fillers,and Specialty Polymers.VIAG Telecom Beteiligungs GmbH,Munich,Germany100%VIAG Telecom has an interest in ONE,an Austrian mobile communicationscompany.Ferngas Nordbayern GmbH,Nuremberg 53.1%Ferngas Salzgitter GmbH,Salzgitter 39%Gas-Union GmbH,Frankfurt am Main 25.9%Erdgasve

43、rsorgungsgesellschaft Thringen Sachsen GmbH(EVG),Erfurt50%Saar Ferngas AG,Saarbrcken 20%HEAG Sdhessische Energie AG(HSE),Darmstadt 21.2%Thga AG,Munich 77.7%NETRA GmbH Norddeutsche Erdgas Transversale&Co.KG,Emstek 41.7%Etzel Gas-Lager Statoil Deutschland GmbH&Co.,Friedeburg-Etzel 74.8%MEGAL GmbH Mitt

44、el-Europische-Gasleitungsgesellschaft,Essen 50%Mittelrheinische Erdgastransport Gesellschaft mbH,Haan(Rhld.)100%MVV Energie AG,Mannheim 15.1%Ruhrgas Industries GmbH,Essen 100%Gasum Oy,Espoo,Finland 20%Latvijas Gaze,Riga,Latvia 47.2%Nova Naturgas AB,Stockholm,Sweden 29.6%Slovensky Plynarensky Priemys

45、el a.s.(SPP),Bratislava,Slovakia 24.5%AB Lietuvos Dujos,Vilnius,Lithuania 35.7%OAO Gazprom,Moscow,Russia 6.4%Ruhrgas UK Exploration and Production Ltd.,London,U.K.100%Powergen Retail Ltd.,Coventry,U.K.100%Powergen CHP Ltd.,London,U.K.100%Powergen Renewables Ltd.,London,U.K.100%Cottam Development Cen

46、tre Ltd.,London,U.K.100%Corby Power Ltd.,Corby,U.K.50%East Midlands Electricity Distribution plc.,Coventry,U.K.100%Midlands Electricity plc.,Worcester,U.K.100%Sydkraft AB,Malm,Sweden 55.2%Graninge AB,Sollestea,Sweden 97.5%E.ON Finland Oyj,Espoo,Finland 65.6%Louisville Gas and Electric Company,Louisv

47、ille,USA 100%Kentucky Utilities Company,Lexington,USA 100%LG&E Capital Corp.,Louisville,USA 100%Art direction:Photography:Production:Typesetting&lithography:Printing:LesmoMarkus AltmannMichael Dannenmann(pages 4 and 20)Albrecht Fuchs(page 10)Christian Schlter(page 14)Jung Produktion,DsseldorfLettern

48、 Partners,DsseldorfDruckpartner,EssenEON AG:An OverviewAs of February 2004Corporate CenterE.ON AGDsseldorfWestern Kentucky Energy Corp.,Henderson,USA 100%LG&E Power Inc.,Louisville,USA 100%LG&E Energy Marketing Inc.,Louisville,USA 100%Central Europe market unit E.ON Energie AG,Munich,Germany100%E.ON

49、 Energie ranks among Europes largest energy services providers andhas operations in Germany and in nine other European countries,includingThe Netherlands,Hungary,Slovakia,the Czech Republic,Switzerland,Italy,and Poland.Pan-European Gas market unit U.K.market unit Nordic market unit U.S.Midwest marke

50、t unit Other ActivitiesE.ON Kraftwerke GmbH,Hanover100%E.ON Kernkraft GmbH,Hanover100%E.ON Wasserkraft GmbH,Landshut 100%E.ON Netz GmbH,Bayreuth 100%E.ON Sales&Trading GmbH,Munich 100%E.ON Bayern AG,Regensburg 98.9%Avacon AG,Helmstedt 56.5%E.ON Hanse AG,Quickborn 73.8%EAM Energie AG,Kassel 73.3%E.DI

51、S AG,Frstenwalde an der Spree71%Teag Thringer Energie AG,Erfurt 72.7%E.ON Westfalen Weser AG,Paderborn 62.8%E.ON Benelux N.V.,The Hague,Netherlands100%E.ON Hungria Rt.,Budapest,Hungary 100%Dl-dunntli ramszolgltat Rt.,Pcs,Hungary92.4%Tiszntli ramszolgltat Rt.,Debrecen,Hungary92.4%szak-dunntli ramszol

52、gltat Rt.,Gyr,Hungary97.6%BKW FMB Energie AG,Bern,Switzerland20%E.ON Czech Holding AG,Munich,Germany100%Jihocesk energetik a.s.,Cesk Budjovice,Czech Republic84.7%Jihomoravsk energetik a.s.,Brno,Czech Republic85.7%Zpadoslovensk energetika a.s.,Bratislava,Slovakia49%Ruhrgas AG,Essen,Germany100%With an

53、nual sales of approximately 600 billion kilowatt-hours of naturalgas,Ruhrgas is one of Europes premier gas companies and among theworlds biggest natural gas importers.The companys customers includeregional and municipal energy utilities and industrial enterprises.Powergen UK plc,London,United Kingdo

54、m100%Headquartered in Coventry,Powergen is one of the United Kingdoms leadingintegrated energy utilities,providing power and gas service to approximately8.6 million customer accounts.E.ON Nordic AB,Malm,Sweden100%Sydkraft manages our energy operations in Northern Europe.Through itsmore than 60 subsi

55、diaries,Sydkraft generates,distributes,markets,anddelivers electricity and gas.LG&E Energy LLC,Louisville,United States100%Louisville-based LG&E Energy is a diversified energy services provider.Itsoperations are focused primarily on the regulated electric and gas utilitysector in Kentucky.Viterra AG

56、,Essen,Germany100%Viterra is a growth-oriented real estate company focusing on its profitableresidential real estate business.Viterra is Germanys leader in the rentaland trading of housing units.The company also develops attractively locatedoffice and apartment buildings.Degussa AG,Dsseldorf,Germany

57、46.5%Degussa is Germanys third-largest chemicals company and the worldsbiggest specialty chemicals enterprise.Degussa is arrayed in market-orientedoperating segments:Construction Chemicals,Fine&Industrial Chemicals,Performance Chemicals,Coatings&Advanced Fillers,and Specialty Polymers.VIAG Telecom B

58、eteiligungs GmbH,Munich,Germany100%VIAG Telecom has an interest in ONE,an Austrian mobile communicationscompany.Ferngas Nordbayern GmbH,Nuremberg 53.1%Ferngas Salzgitter GmbH,Salzgitter 39%Gas-Union GmbH,Frankfurt am Main 25.9%Erdgasversorgungsgesellschaft Thringen Sachsen GmbH(EVG),Erfurt50%Saar Fe

59、rngas AG,Saarbrcken 20%HEAG Sdhessische Energie AG(HSE),Darmstadt 21.2%Thga AG,Munich 77.7%NETRA GmbH Norddeutsche Erdgas Transversale&Co.KG,Emstek 41.7%Etzel Gas-Lager Statoil Deutschland GmbH&Co.,Friedeburg-Etzel 74.8%MEGAL GmbH Mittel-Europische-Gasleitungsgesellschaft,Essen 50%Mittelrheinische E

60、rdgastransport Gesellschaft mbH,Haan(Rhld.)100%MVV Energie AG,Mannheim 15.1%Ruhrgas Industries GmbH,Essen 100%Gasum Oy,Espoo,Finland 20%Latvijas Gaze,Riga,Latvia 47.2%Nova Naturgas AB,Stockholm,Sweden 29.6%Slovensky Plynarensky Priemysel a.s.(SPP),Bratislava,Slovakia 24.5%AB Lietuvos Dujos,Vilnius,L

61、ithuania 35.7%OAO Gazprom,Moscow,Russia 6.4%Ruhrgas UK Exploration and Production Ltd.,London,U.K.100%Powergen Retail Ltd.,Coventry,U.K.100%Powergen CHP Ltd.,London,U.K.100%Powergen Renewables Ltd.,London,U.K.100%Cottam Development Centre Ltd.,London,U.K.100%Corby Power Ltd.,Corby,U.K.50%East Midlan

62、ds Electricity Distribution plc.,Coventry,U.K.100%Midlands Electricity plc.,Worcester,U.K.100%Sydkraft AB,Malm,Sweden 55.2%Graninge AB,Sollestea,Sweden 97.5%E.ON Finland Oyj,Espoo,Finland 65.6%Louisville Gas and Electric Company,Louisville,USA 100%Kentucky Utilities Company,Lexington,USA 100%LG&E Ca

63、pital Corp.,Louisville,USA 100%212For more information about E.ON:Corporate CommunicationsE.ON AGE.ON-Platz 140479 DsseldorfGermanyT+49(0)211-4579-367F+49(0)211-4579-Only the German version of this Annual Report is legally binding.Information on results:This Annual Report contains certain forward-lo

64、oking statements that are subject to risk and uncertainties.For information identifying economic,currency,regulatory,technological,competitive,and some other important factors thatcould cause actual results to differ materially from those anticipated in the forward-looking statements,you should refe

65、r toE.ONs filings to the Securities and Exchange Commission(Washington,DC),as updated from time to time,in particular tothe discussion included in the sections of E.ONs 2002 and 2003 Annual Reports on Form 20-F entitled“Item 3.Key Information:Risk Factors,”“Item 5.Operating and Financial Review and

66、Prospects,”“Item 11.Quantitative and Qualitative Disclosures aboutMarket Risk.”E.ON anticipates that its 2003 Annual Report on Form 20-F will be available at the end of March 2004.In 2003,we continued our landmark series of acquisitions and disposals.We largely completed E.ONs transformation and hav

67、e built a superb platform for sustainable,profitable growth.Our ontop initiative identifiedways in which our companies and people can work together more efficiently,learn from each other,and get better all the timea relentlessfocus on operational excellence that we believe will benefit our customers

68、and our shareholders.Our objective is to make E.ON the worlds best integrated power and gas company.Weve identified ten core concepts to help us get there.TransparencyGrowthPerformanceMarket LeadershipIntegrationLeadershipMarket OrientationEfficiencyFinancial FlexibilityFocusContents2Letter to Share

69、holders Report of the Supervisory Board Year in Review ontop Review of OperationsLetter to Shareholders 4Board of Management8Report of the Supervisory Board10Supervisory Board13Year in Review14ontop20Strategy and Investment Plan 23Report of the Board of Management:Review of Operations30Additional In

70、formation Consolidated Financial Statements Other Directorships Major Shareholdings Glossary211Internal operating profitInternal operating profit is the key figure at E.ON in terms ofmanagement control,and serves as an indicator of a busi-nesss long-term earnings power.Internal operating profit isan

71、 adjusted figure derived from income/(loss)from continu-ing operations before income taxes and minority interests.The adjustments include book gains and book losses fromdisposals,restructuring expenses,and other nonoperatingearnings of an extraordinary nature(see Other nonoperatingearnings).Medium-t

72、erm note programFlexible bond programs used to issue debt instruments.Volumes,currencies,and maturities(usually between 2 and30 years)can be adjusted to meet a companys financingneeds.Net financial positioncash provided by operatingactivitiesIndicator of a companys ability to service its debt.Equals

73、the number of years it would take to pay back a companysnet financial liabilities out of its cash provided by operatingactivities.Non-GAAP financial measuresUnder U.S.securities laws,financial measure not computedin U.S.GAAP must be designated as such in financial reports.OptionThe right,not the obl

74、igation,to buy or sell an underlyingasset(for instance,a security or currency)at a specific dateat a predetermined price from a counterparty or seller.Buyoptions are referred to as calls;sell options,as puts.Ordinary shareA participation in the ownership of an enterprise.It has nopar value(the nomin

75、al value assigned to a share of stock by the corporate charter at the time of issuance).Ordinaryshares typically entitle owners to receive any dividends thatare declared and to vote at the annual shareholders meeting.Other nonoperating earningsIncome and expenses that are unusual or infrequent,such

76、asbook gains or losses from disposals and restructuring expenses(see Internal operating profit).Purchase price allocationIn a business combination accounted for as a purchase,thevalues at which the acquired companys assets and liabilitiesare recorded in the acquiring companys balance sheet.RatingSta

77、ndardized performance categories for an issuers shortand long-term debt instruments based on the probability offull repayment.Ratings provide the foundation for investorsand creditors to compare the risks of various financialinvestments.ROCEAcronym for return on capital employed.A key indicator form

78、onitoring the performance of E.ONs business units.ROCEis the ratio between(a)internal operating profit beforeinterest,taxes,and goodwill amortization and(b)capitalemployed.Capital employed represents the interest-bearingcapital tied up in the E.ON Group.Syndicated line of creditA credit facility ext

79、ended by two or more banks that is goodfor a stated period of time(usually one to seven years)anda stated amount.The borrower may draw down the line indifferent amounts,at different times,and in different curren-cies.Tax shieldDeductions that reduce an enterprises tax burden.For example,the interest

80、 on corporate debt is tax deductible.An enterprise takes this into consideration when choosingbetween equity and debt financing(see Cost of capital).U.S.GAAPAbbreviation for accounting principles that are generallyaccepted in United States.Accounting,valuation,and disclosurepolicies based on the pri

81、nciple of fair presentation of financialstatements to provide information needed for decision-making,especially for investors.3Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings GlossaryE.ON Stock and E.ON Bonds52ROCE55Employees 62Energy Policy and Regul

82、atory Landscape 70Corporate Citizenship 74E.ON Energie 80Ruhrgas 92Powergen 98Viterra 104Business Segments110Independent Auditors Report118Consolidated Statements of Income119Consolidated Balance Sheets120Consolidated Statement of Cash Flow121Consolidated Statements ofChanges in StockholdersEquity12

83、2Notes to the ConsolidatedFinancial Statements123Other Directorships198Corporate Governance201Summary of Financial Highlights207Major Shareholdings208Glossary 210Financial CalendarLetter to ShareholdersReport of the Supervisory Board Year in Review ontop Review of Operations4Letter to ShareholdersAf

84、ter a long spell in the doldrums,the stock market finally began to gather momentum last year.E.ON stock,which finished the year about 40 percent higher,outperformed most other energy equities.With our European peer index,the STOXX Utilities,gaining around 15 percent on the year,your E.ONstock ranked

85、 among the clear winners.For me,this solid performance is both confirmation and motivation.Confirmation,because theincrease in our stock price demonstrates that were both on the right course and at the forefront ofEuropes energy industry.Motivation,because further enhancing E.ONs value remains a top

86、 priority.In fact,I view it as one of the key tasks of the job I took over last May.Since E.ON was created in 2000,Ive considered it one of Europes most exciting companies.In lessthan three years,E.ON transformed itself from a conglomerate into a clearly focused power and gascompany.The Ruhrgas acqu

87、isition last year marked the successful completion of E.ONs transformationunder its Focus&Growth strategy.We took this milestone as an opportunity to conduct a strategic review and to set E.ONs future strategyand structure.It was essential,in my opinion,that we rapidly assimilate the companies we ha

88、dacquired and make E.ON into a truly integrated energy group.In an initiative called“ontop,”we first turned our attention inward.We chose this name for a very good reason.E.ON was already wellpositioned internationally in power and gas,had delivered impressive earnings increases year afteryear,and e

89、njoyed impressive financial strengtheven after the major acquisitions in its core energybusiness.In short,your company was already at the top of its class.From here,the key tasks were tobuild on our premier position,improve our market positions,and further enhance our profitability.Toget there,we id

90、entified ways to bring our companies and people closer together,to take advantageof synergies,and to operate even more efficiently.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary5In ontop,we aligned our priorities with the structure,opportuni

91、ties,and challenges of our markets.We identified five target markets in which E.ON already occupied leading positions:Central Europe,Pan-European Gas,U.K.,Nordic,and U.S.Midwest.The completion of the European internal marketand EU enlargement will create numerous opportunities for further growth in

92、our four European tar-get markets.In European countries whose markets are not yet fully liberalized,keener competitionwill spur consolidation in the energy industry,and consolidation will generate new opportunities forus to grow.We will explore these opportunities carefully and only seize those that

93、 make strategicsense and,above all,deliver value.The U.K.market offers a perfect example of how we have taken advantage of market consolidations.At the beginning of 2004,we acquired Midlands Electricity,a company that ideally complements theelectric distribution business of Powergen,our U.K.subsidia

94、ry.Through this financially attractiveacquisition,E.ON has achieved a leading position in the U.K.energy market just one and a half yearsafter entering it.Were now a premier provider of retail electric and gas service,as well as a leader inpower generation and distribution.We also built on our posit

95、ion in Scandinavia in a way that promises to deliver substantial synergies.By acquiring a majority interest in Graninge,Swedens fourth-largest energy utility,we now rankamong the regions foremost energy service providers.In Central Europe,where E.ON is already the premier provider of electricity and

96、 gas,were focusingour attention on Eastern European energy markets.In the Czech Republic,we acquired majority interestsin two important regional distribution companies.We expect further opportunities to be created byupcoming privatizations and by market consolidations as the EU expands east.Letter t

97、o ShareholdersReport of the Supervisory Board Year in Review ontop Review of Operations6Letter to ShareholdersWe also see promising opportunities for growth in pan-European gas procurement,transmission,andwholesale markets.Industry experts predict that the demand for gas will grow faster than for an

98、yother energy source.We intend to be part of that growth.Thats why weve acquired stakes in select-ed gas production fields and why were extending our gas transmission system in targeted areas.Eastern Europe,where the privatization of gas transmission companies is in the offing,will alsoyield interes

99、ting investment opportunities.As this brief overview demonstrates,our four European target markets offer numerous growth options.Thats why,for now,Europe is the geographic focus of our investments.We currently dont see a needfor strategic action in our fifth target market,the U.S.Midwest,where we oc

100、cupy a solid position.Weve adapted E.ONs structure to fit our five target markets.In each of our markets we have a leadcompany that reports directly to our Dsseldorf corporate center:E.ON Energie,Ruhrgas,Powergen,E.ON Nordic,and LG&E Energy.These five companies will lead their respective business un

101、its,whichare responsible for managing day-to-day operations.We believe that our strong competitive positions and our market-oriented corporate structure give usan excellent platform for achieving further improvements in E.ONs performance.Our central objective is to deliver value to you,our sharehold

102、ers.At E.ON,shareholder value is morethan a slogan.Weve put it into action by setting clear financial targets for return on capital employed(ROCE),earnings before interest and taxes(EBIT),free cash flow,and dividends.We aim to increase ROCE to at least 10.5 percent by 2006.Our ROCE performance for t

103、he 2003 financialyear demonstrates that were well on our way to getting there:we posted a ROCE of 9.9 percent,above our pretax cost of capital of 9.5 percent.In 2003,E.ON again achieved substantial operating improvements.We grew consolidated internaloperating profit by 20 percent to just under 4.6 b

104、illion.Our EBIT was up by 34 percent to more than6.2 billion,bringing us that much closer to our 2006 EBIT target of 6.7 billion.Key drivers wereoperating improvements in our core energy business,efficiency increases achieved under our best-practice program,and the consolidation of newly acquired sh

105、areholdings in and outside Germany.In addition,an exceptionally cold first quarter helped Ruhrgas deliver a significant earnings contribution.Our free cash flow for 2003 was 2.9 billion,surpassing the target of 2.4 billion per year on averagethat we announced last summer.Based on these numbers,our m

106、edium-term plan forecasts that wewill substantially exceed our target for this financial measure for the next several years to come.Driven by appreciable operating improvements and significant gains on disposals,consolidated netincome rose by 67 percent to more than 4.6 billion.We intend for you,our

107、 shareholders,to share in oursuccessful performance.Thats why were proposing to pay a cash dividend of 2 per share,an increaseof 14 percent from last year.Here,too,we are delivering on the pledge we made last summer toincrease our per-share dividend by at least 10 percent per year on average through

108、 2006.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary7Our solid performance in 2003 demonstrates that our financial targets are ambitious but achievable.This is reflected in our outlook for the current year:we expect 2004 EBIT to top last yea

109、rs figure andset another consecutive earnings record.But weve set the bar even higher:our objective is to makeE.ON the worlds leading integrated power and gas company.Our ambition is not only confined todelivering superior financial performance.To realize our vision,we count on the expertise,commitm

110、ent,creativity,and teamwork of all E.ON Group employees.In 2003,their enthusiasm and hard work wereagain instrumental in our success.I would like to take this opportunity to express my sincere thanksfor their achievements.Your company has an outstanding team of people who are the foundation ofour su

111、ccess in the future.Its important to me that we put E.ONs vast intellectual capital to use,thatwe involve employees from all parts of our business in decision-making processes,and that we createfor E.ON a corporate culture in which we openly share our insights,experience,and opinions.As a project,on

112、top is complete.As a motto,it will remain.We will continue our relentless pursuit of operational excellence in order to achieve our primary objective:to create greater value for you,our shareholders.This letter to shareholders contains certain financial measures(consolidated internal operating profi

113、t,EBIT,ROCE,andfree cash flow)that are not calculated in accordance with U.S.GAAP and are therefore considered“non-GAAP financialmeasures”within the meaning of the U.S.federal securities laws.In accordance with applicable rules and regulations,E.ON has presented in this report a reconciliation or de

114、rivation of each non-GAAP financial measure to the mostdirectly comparable U.S.GAAP measure for historical measures and an equivalent U.S.GAAP target for forward-lookingmeasures(please see the commentary on non-GAAP financial measures on the inside front cover of this report).Sincerely yours,Dr.Wulf

115、 H.Bernotat Letter to ShareholdersReport of the Supervisory Board Year in Review ontop Review of Operations8Board of ManagementDr.Gaul Dr.Bergmann Dr.Bernotat Dr.TeyssenDr.Schipporeit Dr.KrperAdditional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary9Dr

116、.Wulf H.BernotatBorn 1948 in Gttingen,member of the Board of Management since 2003Chairman and CEO,Dsseldorf(since May 1,2003)Ulrich HartmannBorn 1938 in Berlin,member of the Board of Management since 1989Chairman and co-CEO,Dsseldorf(until April 30,2003)Prof.Dr.Wilhelm SimsonBorn 1938 in Cologne,me

117、mber of the Board of Management since 2000Chairman and co-CEO,Dsseldorf(until April 30,2003)Dr.Burckhard BergmannBorn 1943 in Sendenhorst/Beckum,member of the Board of Management since 2003Upstream Business,Dsseldorf(since March 5,2003)Dr.Hans Michael GaulBorn 1942 in Dsseldorf,member of the Board o

118、f Management since 1990Controlling/Corporate Planning,M&A,and Legal Affairs,DsseldorfDr.Manfred KrperBorn 1941 in Gelsenkirchen,member of the Board of Management since 1996Human Resources,Infrastructure and Services,Procurement,and Organization,DsseldorfDr.Erhard SchipporeitBorn 1949 in Bitterfeld,m

119、ember of the Board of Management since 2000Finance,Accounting,Taxes,and IT,DsseldorfDr.Johannes TeyssenBorn 1959 in Hildesheim,member of the Board of Management since 2004Downstream Business,Dsseldorf(since January 1,2004)Executive Vice PresidentsKiran Bhojani,DsseldorfDr.Peter Blau,DsseldorfGert vo

120、n der Groeben,DsseldorfUlrich Hppe,Dsseldorf(until December 31,2003)Heinrich Montag,DsseldorfDr.Rolf Pohlig,DsseldorfHans Gisbert Ulmke,DsseldorfLetter to Shareholders Report of the Supervisory BoardYear in Review ontop Review of Operations10Report of the Supervisory BoardIn the year under review,th

121、e Board of Management regularlyprovided us with timely and comprehensive reports aboutE.ONs situation.We monitored and advised managementcontinually.Key Topics of the Supervisory Boards DiscussionsThe Supervisory Board met a total of five times during the2003 financial year.At these meetings,we disc

122、ussed in depthall issues relating to planning,the progress of business,andrisk management that are relevant to E.ON.Between meet-ings,the Board of Management provided the SupervisoryBoard with written reports on business transactions of keyimportance to E.ON.Furthermore,the Chairman of theSupervisor

123、y Board was informed on an ongoing basis aboutall significant business transactions as well as the develop-ment of key financial figures.At the forefront of our discussions were the successful acqui-sition of Ruhrgas,the Group-wide strategic and structural initiative called“ontop,”the implementation

124、 of the disposalsrequired under the ministerial approval of E.ONs acquisitionof Ruhrgas,and developments in the energy policy and regu-latory environment.Acquisition of Ruhrgas CompleteOn January 31,2003,E.ON reached an out-of-court settlementwith the nine companies that had filed law suits against

125、theministerial approval of E.ONs acquisition of Ruhrgas.E.ONcompleted its acquisition of RAGs Ruhrgas shares,and itssale of Degussa shares to RAG,the same day.The Ruhrgasacquisition supplements E.ONs leading position in the elec-tricity industry with a strong position in the gas business.The Supervi

126、sory Board held thorough discussions about theresulting consequences and about Ruhrgass integration intothe E.ON Group.ontopFollowing the E.ON Groups successful transformation into afocused energy company,the key tasks were to adjust itscorporate structure,management structure,and strategyaccordingl

127、y and to develop measures to deliver sustainableperformance improvements.In this context,we conductedthorough discussions about E.ONs strategy going forwardand its focus on five target markets:Central Europe,Pan-Euro-pean Gas,U.K.,Nordic,and U.S.Midwest.We also discussedE.ONs new three-tiered organi

128、zational structure,consistingof a corporate center,market units,and business units,as wellas the incorporation of the ontop performance targets intoE.ONs financial plan.Disposals Required under the Ministerial Approvalof E.ONs Acquisition of RuhrgasThe Board of Management informed us on an ongoing b

129、asisabout the status of the implementation of the disposalsrequired under the ministerial approval of E.ONs acquisitionof Ruhrgas.We devoted particular attention to the sale ofthe shareholdings in Bayerngas,Gelsenwasser,swb(an energyutility based in Bremen),VNG,and EWE.Energy Policy and Regulatory E

130、nvironmentWe dealt extensively with the current energy policy and reg-ulatory environment of the electricity and gas industries,particularly with the establishment of a regulatory authorityfor electricity and gas in Germany and the resulting conse-quences.The Board of Management provided us with det

131、ailedinformation about proposed energy legislation and its effectson the energy industry.In view of the summer heat wave inEurope and the power failures in the United States andsome European countries,we also conducted extensive discussions of aspects of the security of supply and of elec-tricity pr

132、ice trends.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary11Changes to Shareholding PortfolioWe also discussed in detail:the divestment of Viterra Energy Services the merger of certain regional utilities to form two newenergy companies,E.ON H

133、anse and E.ON WestfalenWeserthe acquisition of Graninge,Swedens fourth-largestenergy utilitythe acquisition of Midlands Electricity,an electricity distributor operating in the United Kingdom.Other subjects that the Supervisory Board dealt with in detailincluded the financial situation of the major G

134、roup compa-nies and the E.ON Groups investment,finance,and person-nel plan for 2004 and for the period 20052006.The Boardof Management regularly informed us about the scope ofE.ONs use of derivative financial instruments.Corporate GovernanceOther key issues for the Supervisory Board were the changes

135、to the German Corporate Governance Code,the U.S.Sarbanes-Oxley Act,and their impact on corporate governance at E.ON.At our December meeting,we consequently adapted therules and procedures for the Supervisory Board and its Exec-utive Committee,as well as the compensation plan for theBoard of Manageme

136、nt(see pages 201-202).At the Decembermeeting,we also approved the Declaration of Compliancewith the German Corporate Governance Code pursuant toArticle 161 of the German Stock Corporation Act.The text ofthe Declaration is printed in full on page 206 of this reportand is available at .Committee Meeti

137、ngsThe Supervisory Boards Executive Committee received reportsfrom the Board of Management and discussed them indetail at five meetings.In addition,the Finance and Invest-ment Committee discussed planned investments and theE.ON Groups medium-term plan at three meetings.Betweenits meetings,the Financ

138、e and Investment Committee preparedand adopted resolutions on significant transactions.At itsfive meetings,the Audit Committee devoted particularattention to the Annual Report,the Interim Reports,account-ing issues,and E.ONs dealings with its independent auditors.Approval of Financial StatementsPwC

139、Deutsche Revision Aktiengesellschaft,Wirtschaftsprfungs-gesellschaft,Dsseldorf,the independent auditors approvedby the Annual Shareholders Meeting and appointed by theSupervisory Board,audited and submitted an unqualifiedopinion on the Financial Statements of E.ON AG and theConsolidated Financial St

140、atements for the year endedDecember 31,2003,as well as the combined Review of Oper-ations.The auditors also reviewed and delivered an auditopinion on the Consolidated Financial Statements preparedin accordance with U.S.GAAP.The Consolidated FinancialStatements are supplemented by the requisite comme

141、ntaryin compliance with Article 292a of Germanys CommercialCode.The Consolidated Financial Statements prepared inaccordance with U.S.GAAP exempt the Company from therequirement to publish Consolidated Financial Statements inaccordance with German GAAP.Furthermore,the auditorsexamined E.ON AGs risk d

142、etection system.This examinationrevealed that the system is fulfilling its tasks.After beingsubject to a preliminary review by the Audit Committee,theFinancial Statements,the Review of Operations,and theAuditors Reports were given to all the members of theSupervisory Board.The Audit Committee and th

143、e SupervisoryBoard,at its meeting to approve the Financial Statements,also reviewed these documents in detail,with the indepen-dent auditors present on both occasions.We examined the Financial Statements of E.ON AG,the Reviewof Operations,and the Board of Managements proposalregarding the appropriat

144、ion of net income available for dis-tribution and agreed to these without any objections.Weapproved the Auditors Report.We approved the Financial Statements of E.ON AG preparedby the Board of Management and the Consolidated FinancialStatements.The Financial Statements are thus adopted.Weagree with t

145、he Report of the Board of Management and,inparticular,with its statements concerning E.ONs futuredevelopment.We agree with the Board of Managements proposal forappropriating net income available for distribution,whichincludes a cash dividend payment of 2 per share.Changes to the Composition of the S

146、upervisoryBoard and its Committees The term of the Supervisory Board ended at the completionof the Annual Shareholders Meeting on April 30,2003,at whichUlrich Hartmann,Prof.Dr.Ulrich Lehner,Prof.Dr.Wilhelm Simson,and Dr.Georg Freiherr von Waldenfels were appointedto the Supervisory Board as new memb

147、ers.Dr.Jochen Holzer,Dr.h.c.Andr Leysen,Kurt F.Viermetz,and Dr.Bernd W.Vossresigned from the Supervisory Board effective April 30,2003.Letter to Shareholders Report of the Supervisory BoardYear in Review ontop Review of Operations12Report of the Supervisory BoardWith their prudent counsel and busine

148、ss acumen,all fourgentlemen played an important role in the E.ON Groupstransformation into a leading international energy servicesprovider.We would like to take this opportunity to thankthem again for their important contributions to E.ON.At the Employee Delegates Meeting on March 20,2003,SeppelKrau

149、s,Peter Obramski,and Gerhard Skupke were appointedto the Supervisory Board as employee representatives effec-tive April 30,2003.Margret Mnig-Raane,Jan Kahmann,andArmin Schreiber resigned from the Supervisory Board effec-tive April 30,2003.The Supervisory Board thanks them for theirfine work on the b

150、oard and for their constructive approachto their responsibilities.At the Supervisory Boards constitutive meeting on April 30,2003,it appointed Ulrich Hartmann to serve as Chairman ofthe Supervisory Board and Hubertus Schmoldt to serve asDeputy Chairman of the Supervisory Board for the durationof its

151、 term.Dr.Klaus Liesens term as Chairman of E.ON AGs SupervisoryBoard ended on April 30,2003.Through his wise counsel andmasterful chairmanship,Dr.Liesen played a crucial role in theE.ON Groups far-reaching transformation into a focusedenergy services provider.We are delighted that he continuesto ser

152、ve E.ON as a member of the Supervisory Board.By law,the Supervisory Boards Chairman(Ulrich Hartmann)and Deputy Chairman(Hubertus Schmoldt)are automaticallythe Chairman and Deputy Chairman,respectively,of theSupervisory Boards Mediation Committee.At its constitutivemeeting,the Supervisory Board appoi

153、nted Dr.Schulte-Noelleand Mr.Blauth to the Mediation Committee.The ExecutiveCommittee also consists of Mr.Hartmann(Chairman),Mr.Schmoldt,Dr.Schulte-Noelle,and Mr.Blauth.Dr.Baumann,Mr.Blauth,Mr.Hartmann,and Mr.Raschke were appointedas members of the Audit Committee.Dr.Baumann chairs theAudit Committe

154、e.In addition,the Supervisory Board appointedDr.Cromme,Mr.Hartmann,Mr.Hinrichsen,and Mr.Schmoldt as members of the Finance and Investment Committee.Mr.Hartmann chairs the Finance and Investment Committee.Changes to the Composition of the Board of Management On May 1,2003,Dr.Wulf H.Bernotat became Ch

155、airman ofE.ON AGs Board of Management,succeeding Ulrich Hartmannand Prof.Dr.Wilhelm Simson.At its meeting on September 3,2002,the Supervisory Board had appointed Dr.Bernotat as amember and Chairman of the Board of Management for theperiod from May 1,2003,to April 30,2008.Mr.Hartmann and Prof.Dr.Sims

156、on retired from E.ON AGsBoard of Management effective April 30,2003.They werethanked publicly at the Annual Shareholders Meeting fortheir sterling service to the E.ON Group.At its meeting on March 5,2003,the Supervisory Boardappointed,effective immediately,Dr.Burckhard Bergmann asa member of E.ON AG

157、s Board of Management.Dr.Bergmannremains Chairman of the Executive Board of Ruhrgas AG.At its meeting on December 11,2003,the Supervisory Boardappointed Dr.Johannes Teyssen as a member of E.ON AGsBoard of Management effective January 1,2004.Dr.Teyssenremains Chairman of the Board of Management of E.

158、ONEnergie AG.The Supervisory Board wishes to thank the Board of Manage-ment,the Works Councils,and all the employees of E.ON AGand its affiliated companies for their dedication and hard work.DsseldorfMarch 10,2004The Supervisory BoardUlrich HartmannChairmanAdditional Information Consolidated Financi

159、al Statements Other Directorships Major Shareholdings Glossary13Supervisory BoardHonorary ChairmanProf.Dr.Gnter VogelsangDsseldorfSupervisory BoardUlrich HartmannChairman of the Supervisory Board,E.ON AG,Dsseldorf(since April 30,2003)Hubertus SchmoldtChairman of the Board of Management,Industriegewe

160、rkschaft Bergbau,Chemie,Energie,HanoverDeputy ChairmanGnter AdamForeman,HanauDr.Karl-Hermann BaumannChairman of the Supervisory Board,Siemens AG,MunichRalf BlauthIndustrial Clerk,MarlDr.Rolf-E.BreuerChairman of the Supervisory Board,Deutsche Bank AG,Frankfurt am MainDr.Gerhard CrommeChairman of the

161、Supervisory Board,ThyssenKrupp AG,DsseldorfWolf-Rdiger HinrichsenHead of the Economic Affairs Department,E.ON AG,DsseldorfUlrich HockerGeneral Manager,German Investor Protection Association,DsseldorfDr.Jochen HolzerHonorary Senator,former Chairman ofthe Supervisory Board,VIAG AG,Munich(until April 3

162、0,2003)Jan KahmannMember of the Board,Unified Service Sector Union(ver.di),Berlin(until April 30,2003)Eva Kirchhof,Diploma Physicist,MarlSeppel KrausLabor Union Secretary,Munich(since April 30,2003)Prof.Dr.Ulrich LehnerPresident and Chief Executive Officer,Henkel Group,Dsseldorf(since April 30,2003)

163、Dr.h.c.Andr LeysenHonorary Chairman of the Administrative Board,Gevaert N.V.,Mortsel,Belgium(until April 30,2003)Dr.Klaus LiesenHonorary Chairman of the SupervisoryBoard,Ruhrgas AG,Essen(Chairman until April 30,2003)Margret Mnig-RaaneVice-Chairwoman of the Board,Unified Service Sector Union(ver.di),

164、Berlin(until April 30,2003)Peter ObramskiLabor Union Secretary,Gelsenkirchen(since April 30,2003)Ulrich OtteSystems Engineer,MunichKlaus-Dieter RaschkeTax Assistant,NordenhamArmin SchreiberElectrical Engineer,Grafenrheinfeld(until April 30,2003)Dr.Henning Schulte-NoelleChairman of the Supervisory Bo

165、ard,Allianz AG,MunichProf.Dr.Wilhelm SimsonMunich(since April 30,2003)Gerhard SkupkeGas Technician,Frstenwalde(since April 30,2003)Kurt F.ViermetzRetired Vice-Chairman and Director of the Board,J.P.Morgan&Co.,Inc.,New York(until April 30,2003)Dr.Bernd W.VossMember of the Supervisory Board,Dresdner B

166、ank AG,Frankfurt am Main(until April 30,2003)Dr.Georg Freiherr von WaldenfelsFormer Minister of State,Attorney,Munich(since April 30,2003)Supervisory Board CommitteesExecutive CommitteeUlrich Hartmann,ChairmanHubertus Schmoldt Ralf BlauthDr.Henning Schulte-NoelleAudit Committee Dr.Karl-Hermann Bauma

167、nn,ChairmanRalf BlauthUlrich HartmannKlaus-Dieter RaschkeFinance and Investment CommitteeUlrich Hartmann,ChairmanDr.Gerhard CrommeWolf-Rdiger HinrichsenHubertus SchmoldtLetter to Shareholders Report of the Supervisory Board Year in Reviewontop Review of Operations14Year in ReviewJanuaryE.ON conclude

168、s an agreement to sell its nearly 16 percent shareholding in Bouygues Telecom,Frances third-largest wireless communications company.The Bouygues Group acquires theshares in a two-stage transaction.E.ON reaches an out-of-court settlement with the nine companies that filed lawsuits in stateSuperior Co

169、urt in Dsseldorf against the ministerial approval of E.ONs acquisition of Ruhrgas.All of the lawsuits are withdrawn,and E.ON completes its acquisition of RAGs Ruhrgas sharesthe same day.By early March,E.ON acquires 100 percent ownership of Ruhrgas.The cash offer RAG tendered to all Degussa stockhold

170、ers takes effect after the fulfillment of the conditions that had been delaying it.RAG now owns 46.48 percent of Degussas stock.E.ONalso owns 46.48 percent.The remaining 7.04 percent is widely held.In the second stage of thetransaction,RAG will acquire 3.62 percent of Degussas stock on May 31,2004,g

171、iving it 50.1 per-cent and E.ON 42.86 percent ownership of Degussa.AprilViterra sells Viterra Energy Services,a residential services company,to CVC capital partners,afinancial investor.The transaction marks the successful completion of Viterras exit from thisbusiness line.MayDr.Wulf H.Bernotat becom

172、es Chairman of the Board of Management and CEO of E.ON AG,suc-ceeding co-CEOs Ulrich Hartmann and Prof.Dr.Wilhelm Simson.Mr.Hartmann becomes Chairman,Prof.Dr.Simson a member,of E.ON AGs Supervisory Board.E.ON launches ontop,its enterprise-wide structural and strategic initiative.JuneRuhrgas acquires

173、 a 15 percent stake in Njord Field,a gas and oil producing basin in the NorwegianNorth Sea,from ConocoPhillips,an American petroleum company.Njord Field has just over 10 bil-lion cubic meters equivalent of natural gas reserves and 51 million barrels of oil reserves.At E.ON Bayerns annual general mee

174、ting,the shareholders vote in favor of a squeeze-out underwhich E.ON Energie,E.ON Bayerns principal shareholder,will acquire the shares of minorityshareholders.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary15AugustE.ON Energie further stream

175、lines its energy marketing operations by merging three of its utilitysubsidiaries in northern GermanySchleswag,Hein Gas,and Hanse Gasto create E.ON Hanse.The merger takes commercial effect retroactively to January 1,2003.E.ON Energie merges three regional utilitiesElektrizittswerk Wesertal(EWW),Pesa

176、g,andElektrizittswerk Minden-Ravensberg(EMR)to form E.ON Westfalen Weser.The merger takescommercial effect retroactively to January 1,2003.E.ON reports the results of the first phase of ontop.Following the successful transformationinto an energy group,E.ONs focus moving forward will be on improving

177、its profitability bydelivering operational excellence and by exploring targeted,value-creating acquisitions.Theproject also sets clear priorities.SeptemberE.ON Energie sells its 80.5 percent stake in Gelsenwasser to a joint-venture company owned bytwo municipal utilities,Stadtwerke Dortmund and Boch

178、umer Stadtwerke.The transaction fulfillsa condition of the ministerial approval of E.ONs acquisition of Ruhrgas.E.ON Energie obtains majority interests in two Czech regional electric utilities,JME and JCE.As part of the same deal,E.ON Energie sells its minority interests in two other Czech regionale

179、lectric utilities,ZCE and VCE.OctoberPowergen agrees to terms for the acquisition of Midlands Electricity,an electricity distributor inthe U.K.,with its U.S.owners,Aquila and FirstEnergy.The transaction is completed in early 2004.NovemberSydkraft acquires a further 38.6 equity interest in Graninge,g

180、iving it majority ownership of Swedens fourth-largest energy utility.Sydkraft tenders a cash offer to purchase the stock ofminority stockholders.By the end of the offer period in January 2004,Sydkraft owns 97.5 percentof Graninge.At an extraordinary meeting of Thgas shareholders on November 28,2003,

181、the shareholdersvote in favor of a squeeze-out under which E.ON will acquire the shares of Thgas minorityshareholders.In compliance with the terms of the ministerial approval of E.ONs acquisition of Ruhrgas,E.ON Energie and Ruhrgas sell their respective 22 percent equity interests in Bayerngas to th

182、emunicipal utilities of Munich,Augsburg,Regensburg,and Ingolstadt and to the City of Landshut.E.ON fulfills a further condition of the ministerial approval of its acquisition of Ruhrgas by selling its 32.4 percent equity interest in swb,an energy utility headquartered in Bremen,to Oldenburg-based EW

183、E.DecemberE.ON concludes agreements to divest its equity interests in EWE and VNG.The transactions mark the fulfillment of all the conditions stipulated in the ministerial approval of E.ONs acquisitionof Ruhrgas.TransparencyTransparencyWere committed to making our company as transparent as possiblef

184、or our stockholders and our employees.Weve openly stated ourfinancial targets for 2006.Our financial reporting will be segmentedaccording to our new corporate structure and even more transparent.We want our investors to make informed decisions.Thats why thisreport and our other financial publication

185、s contain comprehensiveand up-to-date information about each of our business segments.Letter to Shareholders Report of the Supervisory Board Year in Review ontopReview of Operations20ontopSituation at the Start of 2003By making landmark acquisitions and disposals in recentyears,we have transformed E

186、.ON from a conglomerate intoa focused power and gas group.Today,nearly 90 percent ofour capital is employed in our energy business,whereas justthree years ago more than two thirds was employed outsideit.Following these far-reaching changes,our key task was toalign E.ONs organization,management,strat

187、egy,and operat-ing performance with the new structure of our business port-folio.That meant exploring the following questions:How should our energy business be managed in thefuture?Where should we concentrate our investments over themedium term?What is the right organizational structure for our inte

188、-grated energy company?How can we positionand keepE.ON at the forefrontof our industry?To find answers to these questions,we launched a Group-wide project.Results Announced in August 2003Three months after the project began,we announced theresults.Our thorough review yielded key medium-termstrategic

189、 priorities:to reiterate our focus on the power and gas businessand on shaping the convergence of these industriesto give E.ON a market-oriented organizational structureto concentrate on integration andperformanceimprovementto make Europe the geographical focus of our invest-ments.We confirmed our c

190、ommitment to the integrated energymodel and to operating in all steps of the power and gasvalue chain in the five target markets in which E.ON alreadyhas leading positions:Central Europe,Pan-European Gas,U.K.,Nordic,and U.S.Midwest.In addition to these,we viewItaly and Russia as potential new market

191、s for E.ON.We haveclear priorities in our target markets.Of paramount impor-tance for our strategy going forward is that we furtherstrengthen our competitive position in the European powerand gas marketplace.For this reason,Europe will be the geo-graphic focus of our investments over the medium term

192、.Theprincipal objective of our capital expenditures will be tostrengthen and consolidate our existing businesses.No largeacquisitions are planned.The E.ON Groups new market-oriented organizational struc-ture has three tiers.The corporate centers main tasks willbe to chart E.ONs strategic course as a

193、n integrated energycompany,to manage business issues that transcend individualmarkets,and to continually optimize our business portfolio.Project Launched in May 2003The project,called“ontop,”was launched in May 2003,whenover 100 senior managers and professionals from all of ourmajor subsidiaries gat

194、hered at our Dsseldorf headquarters.These energy industry experts formed project teams whichaddressed individual issue areas.In the weeks that followed,the project participants devel-oped proposals for their issue areas and discussed them attwo management conventions.On the basis of these propos-als

195、,the ontop participants established strategic prioritiesand made key decisions.How did ontop change E.ON?It wasnt about revolution.Instead,it was about working together to identify andimplement a wide range of measures to further improveE.ONs performance.And its precisely our attention todetail and

196、our commitment to operational excellencethat will ensure that ontop has a long-lasting impact.Dr.Dierk Paskert,Senior Vice President Corporate Development,E.ON AGAdditional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary21Pan-European GasNo.3 in gas sup

197、plyU.S.Midwest,Kentucky:No.1 in power generationNo.1 in power and gas retailingU.K.No.2 in power generationNo.2 in power and gas retailingCentral EuropeNo.2 in power generationNo.1 in power and gas retailingNordicNo.4 in power generationNo.3 in power and gas retailingLetter to Shareholders Report of

198、 the Supervisory Board Year in Review ontopReview of Operations22ontopunder way.Our other financial targets are to increase ourcumulative free cash flow1to more than 9.5 billion by 2006and to average double-digit annual growth in our cash div-idend per share.While achieving these targets,we aim toma

199、intain at a minimum a strong single“A”rating in order toensure that we have financial flexibility we need.Implementation Phase Began in September 2003Two weeks after we announced the results of the first phaseof ontop,the implementation phase began,in which seniormanagers from all of our major subsi

200、diaries led more than25 project teams in implementing the project results.Therewere three key task areas:IntegrationThe key integration tasks were to establish E.ON Nordic/Syd-kraft,Powergen,and LG&E Energy as market unit lead com-panies that report directly to the corporate center,to trans-fer subs

201、idiariessuch as Thga and our stakes in certainHungarian gas utilitiesbetween market units,and to opti-mize the powergas and gasgas interfaces between ourmarket units.PerformanceHere,the key tasks were to incorporate our performance targets into our business plan,to optimize the functions performed b

202、y our corporate center,and to discuss ways to increase capital productivity.LeadershipThe key leadership tasks were to enhance the corporate cen-ters leadership role,to implement the corporate centersthree new energy-industry functions,to adjust control andreporting pathways,introduce centralized hu

203、man resourcesmanagement for our top executives,and to continue thedevelopment of an E.ON corporate identity.On January 1,2004,we began the new financial year underour new corporate structure.E.ONCorporate CenterRuhrgasE.ON EnergieCentral EuropeNordicE.ONNordic/SydkraftPan-European GasU.S.MidwestPowe

204、rgenU.K.LG&E EnergyThe five market unit lead companies are tasked with manag-ing their respective markets and regions in a decentralizedfashion,leaving responsibility for running day-to-day opera-tions to their business units.Our integrated energy business will be led by a strong cor-porate center,t

205、o which three new functions have been addedto enhance coordination and optimization of our electricityand gas businesses.The new functions are market manage-ment,operational excellence,and regulatory management.Our market management team is responsible for optimizingour energy business in areas that

206、 affect all of our markets.The operational excellence staff is tasked with overseeingthe transfer of best practices across the enterprise.The regu-latory management team coordinates regulatory issues thattranscend the individual market units.In addition to its cur-rent responsibilities,our corporate

207、 development departmentwill develop long-term energy scenarios and evaluate theimpact of new technologies on our business.The corporatecenter will also manage the development of the E.ON Groupsexecutives.Furthermore,we are developing a shared corpo-rate identity for the E.ON Group.Ambitious TargetsE

208、.ON has set ambitious financial targets.We aim to increaseour return on capital employed(ROCE)1from the 9.2 percentwe achieved in 2002 to at least 10.5 percent by 2006.To getthere,we intend to grow our earnings before interest andtaxes(EBIT)1by 2 billion over the same period.We expectkey contributio

209、ns to come from the consolidation of newcompanies,from organicgrowth,and from an efficiency-improvement and cost-management program that is already1ROCE,EBIT,and free cash flow are non-GAAP financial measures.Our targets for themost directly comparable U.S.GAAP financial measurestotal assets and net

210、incomeare approximately 110 billion and 3.4 billion,respectively.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary23Strategy and Investment PlanSuccessful Corporate TransformationIn 2003,we continued with the transformation of E.ON.Ouracquisiti

211、on of Ruhrgas in the early part of the year signifi-cantly strengthened our position as a leading electricity andgas company.Following the disposal of part of our Degussastake(a transaction that was linked to our acquisition ofRuhrgas),we also divested our Bouygues Telecom interestand Viterra Energy

212、 Services.Review of Medium-Term StrategyAs part of the ontop project,we reviewed our corporatestrategy for the medium term and established key strategicpriorities.The purpose of our review was not to radicallyalter our course.Rather,in the wake of our substantial growth,the review was designed to id

213、entify the areas where we still needed to enhance our portfolio of shareholdings andto fine-tune our organization so that we can capitalize onour proven strengths as a focused energy company.Our objec-tive going forward is to achieve further increases in profita-bility and returns in order to delive

214、r additional value to ourshareholders.To achieve this objective,we intend to con-tinually improve our operating performance as well as tostrengthen our solid strategic position in the electricity and gas business by making selective investments in clearlydefined target markets in Europe.The ontop pr

215、oject confirmed our strategicfocus on electric-ity and gas.To go along with our fully integrated electricitybusiness,the Ruhrgas acquisition gives us solid market posi-tions at the key steps of the natural gas value chain:fromprocurement and transmission to wholesale and retail.Thisgives us the scop

216、e we need to play an active role in shapingpowergas convergence in our energy marketing operations.Moreover,gas is expected to play an increasingly importantrole in Germanys energy future as a fuel for power production.Central EuropePan-European GasU.K.NordicU.S.MidwestOtherTotalbn5.41.71.73.70.90.4

217、13.8%3912122773100Investment Plan 20042006The ontop project was an excellent opportunity for thebusinesses that comprise the E.ON Group to start work-ing together more closely,both to explore the strategicbenefits of our combined businesses and to developongoing dialog on the key strategic questions

218、 affectingeach market unit.Michael Lewis,Vice President Corporate Development,Nordic,U.K.,and U.S.,E.ON AGThe focus of our corporate development in the near term willbe tointegrate the companies we have acquired and toadapt our organization so that we have the right structure todeliver superb perfor

219、mance as a focused energy group.Wealso intend to add to some of our existing shareholdings inorder to consolidate our market positions.No large acquisi-tions are planned.Letter to Shareholders Report of the Supervisory Board Year in Review ontopReview of Operations24Strategy and Investment PlanTotal

220、:13.8 billionInvestment Plan 200420063%Other7%U.S.Midwest27%Nordic12%U.K.12%Pan-EuropeanGas39%Central EuropeBright Prospects for Our Market Units The strategic development of our Central Europe market unitwill center around integrating our market positions anddeepening the relationships between our

221、affiliates operatingin different national marketplaces.We aim to create value byextending our cost leadership and by gearing our operationsto the upcoming changes to the regulatory landscape,whichinclude the establishment of a regulatory agency for theGerman energy industry and the start of carbon d

222、ioxide(CO2)emissions allowance trading.In addition,we intend tostep up our enterprise-wide knowledge transfer efforts sothat new insights can deliver measurable earnings improve-ments.Our Pan-European Gas market unit is faced with challengesand opportunities as Europes gas markets become more libera

223、lized.Foremost are the changes related to fulfillingthose conditions of the ministerial approval that have a longer-term impact(see page 92 for more information).Anotherimportant focal point of our strategy is to optimize the gasprocurement of our market units and the necessary infra-structure to ac

224、hieve this.Furthermore,opportunities exist incentral Eastern Europe,where gas market liberalization iscreating a demand for strong companies to partner withlocal operators.In addition,we aim to further strengthen theposition of our gas business by producing a greater share ofthe gas we procure.This

225、is an example of how we are exe-cuting our strategy of integrating all steps of the energy valuechain,a process that began with the acquisition of Ruhrgas.A key focus of the strategic development of our U.K.marketunit is to optimize our portfolio of generating assets.Anadjustment to the generation f

226、leet is necessary due to theintroduction of CO2emissions allowance trading and to theU.K.governments plan to stimulate growth in renewablegeneration.In light of the strict regulatory regime in theUnited Kingdom,another important element of our strategyis to devote capital expenditures to our U.K.pow

227、er distribu-tion network.As with all our market units,our Group-wideoperational excellence program aimed at continually improv-ing ourefficiency will be an integral part of the U.K.marketunits development going forward.The key tasks facing our Nordic market unit are tointegrateGraninge and to implem

228、ent the new management structurefor our operations in Northern Europe.We also expect tomake small additions to our shareholdings in Sweden or Fin-land in order to consolidate our position in these markets.The additions could be on the generation side or on the dis-tribution and marketing side.Over t

229、he next few years,our U.S.Midwest market unit willconcentrate on delivering additional operating performanceand optimizing its existing business.We have no plans in themedium term to make further acquisitions in the UnitedStates.Investment PlanOur investment plan is fully in line with our strategy o

230、f consolidating and integrating our existing businesses.TheE.ON Groups medium-term plan calls for 13.8 billion of invest-ments for 2004 to 2006,of which well over half8.7 bil-lionis earmarked for property,plant,and equipment.Thefocus of our fixed asset investments will be on maintainingand expanding

231、 our power and gas networks and on imple-menting environmental compliance programs in our genera-Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary25tion fleet.Financial investments of 5.1 billion are aimedmainly at consolidating our current mar

232、ket positions.Nolarge acquisitions are planned.More than 60 percent of ourplanned investments are targeted outside Germany,reflect-ing the degree to which E.ON has become a truly interna-tional energy group.Our investment plan follows E.ONs segmentation into themarket units defined by ontop:We will

233、invest 5.4 billion in our Central Europe marketunit,nearly 80 percent of which will be invested in elec-tric generation and transmission assets.Financial invest-ments of 1.1 billion will be used to increase our owner-ship in companies in which we already have a stake.This figure mainly reflects a po

234、ssible increase in ourinterest in ZSE,a Slovakian electric distribution compa-ny,and the anticipated payments to E.ON Bayernsminority stockholders under the squeeze-out procedure.Our Pan-European Gas market unit plans to invest1.7 billion.This figure contains 0.9 billion in financialinvestments,incl

235、uding projects to ensure the security ofgas supply and to enlarge Thgas market position inItaly.We also expect upcoming privatizations in Centraland Eastern Europe to create opportunities for acquisi-tions.Our gas transmission network will be the mainfocal point of fixed asset investments.Our U.K.ma

236、rket unit will invest 1.7 billion,primarily inits electric generation and distribution assets.The planned investments of our Nordic market unit total3.7 billion,just over 70 percent of which is to acquireadditional equity in Sydkraft and in E.ON Finland whenminority stockholders exercise their put o

237、ptions and toacquire outstanding shares in Graninge.Investments infixed assets will be aimed at power production,heatgeneration,and power distribution assets.Our U.S.Midwest market unit will invest 0.9 billion,exclusively in property,plant,and equipment,primarilyto maintain electric generation and t

238、ransmission assets.GrowthGrowthWe intend to keep growing.But selectively and in accordancewith strict financial criteria.Thats how we can deliver the mostvalue to our shareholders.The geographic focus of our medium-term investments comprises our target markets in Europe.Thisinvestment strategy aims

239、to build on our existing market positionsand to integrate the companies we acquire so that we can forgean even stronger energy group.Our acquisition and integration of Graninge in Sweden and Midlands Electricity in the UnitedKingdom are perfect examples of how we are delivering on ourstrategy of dis

240、ciplined,targeted growth.Report of the Board of ManagementLetter to Shareholders Report of the Supervisory Board Year in Review ontopReview of Operations30in real terms in 2003,faster than the 3.0 percentgrowthachieved in 2002.Higher growth was recorded in both indus-trialized and emerging economies

241、.Among the latter,Chinarecorded particularly vigorous economic growth.Influencedby the situation in Iraq,oil prices rose to nearly$35 a barrelin the early months of 2003.During the rest of the year,oilprices averaged slightly above the OPEC price band of$22 to$28 a barrel.The U.S.economy displayed r

242、obustgrowth throughout 2003and had an especially strong third quarter.In 2003,growthwas again driven by increased consumer spending,togetherwith an expansionary fiscal policy and the U.S.FederalReserve Banks accommodationist monetary policy.The U.S.economy also benefited from increased private inves

243、tment.A sharp rise in public spending,particularly in appropriationsfor defense,provided additional support.With the economynot approaching full capacity or full employment,expansiondid not generate inflationary pressure.The increase in coreconsumer prices was muted,with prices rising 2.3 percent in

244、2003,compared with 1.6 percent in 2002.Eurozone growth in 2003 was hesitant.The EUs grossdomestic product(GDP)expanded just 0.4 percent in realterms in 2003,after an equally lethargic 0.9 percent growthrate in 2002.With Europes economy weak and its currencystrong,there was little inflationary pressu

245、re.The Council ofEconomic Experts estimates that eurozone consumer pricesrose 2.0 percent in 2003 compared with 2.3 percent in theprior year.Economic growth was considerably brisker in thenew EU member states in Central and Eastern Europe and inthe United Kingdom,where real GDP advanced 2.0 percento

246、n the back of strong consumer spending.Other factors driving U.K.economic growth were the favorable labor marketand greater investment activity than in the rest of Europe.Consumer prices in the United Kingdom rose 1.4 percent,well below the EU average.+/%+27+25+34+20+67+0.75+536234 in millionsSalesE

247、BITDA2EBIT2Internal operating profit3Net incomeROCE4(in%)Cost of capital(in%)Cash provided by operating activitiesInvestmentsEmployees at year end 200346,3649,4586,2284,5654,6479.99.55,5389,19666,5492002136,6247,5584,6493,8172,7779.29.53,61424,159101,3361Adjusted for discontinued operations(see comm

248、entary on pages 133141).2Non-GAAP financial measure;see reconciliation to internal operating profit onpages 112113.3Non-GAAP financial measure;see reconciliation to net income on page 36.4Non-GAAP financial measure;see derivation on pages 5557.5Change in percentage points.E.ON GroupEconomic Environm

249、entAt the start of 2003,the Iraq crisis put a brake on global eco-nomic growth.Toward the end of the year,however,therewere increasing signs that the economy was expanding andeven gaining momentum.The stock markets in the majorindustrial countries recovered lost ground,and consumerand business confi

250、dence indicators trended higher.Accord-ing to an estimate by the German Council of EconomicExperts,world trade grew by 3.7 percent in 2003,following3.2 percentgrowth in 2002.Global output rose 3.5 percentReview of Operations Internal operating profit and net income markedly higher Cash flow up subst

251、antially Proposed dividend increased to 2 per share Further EBIT increase forecast for 2004Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary31In 2003,Germanys economy continued the weak perfor-mance of recent years.In the first half of the year

252、 in particu-lar,export growth was incremental,and domestic demand00.50.52003Annual change in percent1.01.52.02.5German GDP Growth in Real Terms0.120020.20.82.92.0200120001999Source:German Federal Office of Statistics.00.50.5GermanyAnnual change in percent1.01.52.02.53.02003 GDP Growth in Real Terms0

253、.1France0.20.42.31.42.00.73.32.92.7ItalySpainSwedenU.K.E15Central and Eastern EuropeUSAJapanSource:German Council of Economic Experts(November 2003),German FederalOffice of Statistics.remained weak.Exports share of the economy grew at afaster rate in the second half of the year,while import activity

254、declined.Consumer spending rose only slightly,and invest-ments in both the equipment and construction sectorsdeclined.Germany has been under considerable pressurenot to add to its deficit,so there was little room for the gov-ernment to use public spending to spur economicgrowthor job creation.With t

255、he economy sluggish and not near fullcapacity,and with producer prices rising only incrementally,consumer prices increased a modest 1.1 percent in 2003,giving Germany the lowest inflation rate in the eurozone.Letter to Shareholders Report of the Supervisory Board Year in Review ontop Review of Opera

256、tions32Review of OperationsPercentagesPetroleumNatural gasHard coalLigniteNuclearHydro and wind Net electricity imports/exportsOtherTotal200336.322.513.711.412.61.00.22.7100.0200237.321.713.211.612.61.00.02.6100.0Primary Energy Consumption in Germany by Energy SourceSource:AG Energiebilanzen(prelimi

257、nary figures).NuclearLigniteHard coalNatural gasPetroleum productsHydroOtherTotalBillionkWh156.4144.0121.938.32.322.28.5493.6Percent-ages3229258421002003 Net Generation in Germany by Energy SourceSource:VDEW(perliminary figures).Germanys natural gas consumption rose by about 4 percentto 110.0 MTCE i

258、n 2003.Gas accounted for 22.5 percent of primary energy consumption compared with 21.7 percent inthe previous year.Gas consumption grew primarily in theresidential and small business segment,which consumed5 percent more gas than in 2002.More gas was also used inelectric generation,with the amount of

259、 electricity producedby gas-fired generating facilities rising 6 percent.With political change in place,Eastern Europes energy mar-kets are developing rapidly.Countries like Hungary,the CzechRepublic,and Slovakia have displayed dynamic economicgrowth in recent years.Eastern Europe now consumes about

260、625 billion kWh of electricity per year.According to preliminary estimates,Sweden consumed145.3 billion kWh of electricity in 2003,down slightly fromthe prior-year figure of 148.7 billion kWh.Because hydro-electric plants generate a substantial portion of Scandinaviaselectricity,the low levels of pr

261、ecipitation in 2003 led to ahigher percentage of electricity being produced from moreexpensive energy sources such as natural gas and fuel oil.England and Wales consumed 305 billion kWh of electricity in2003,compared with 300 billion kWh in 2002.Gas consumptionrose 8 percent year-on-year to 1,089 bi

262、llion kWh.In the U.K.wholesale electricity market,forward wholesale prices recov-ered from their low in 2002 and increased substantially fromApril 2003,reaching a level of approximately 28 per mega-watt-hour(MWh)for peakload in December.The main driverswere higher fuel costs,forecast reductions in e

263、xcess plantcapacity,and expected future environmental costs.U.K.wholesale gas prices increased in absolute terms and weremore volatile during 2003,driven by higher oil prices andsupply-demand issues in the United Kingdom and ContinentalEurope.Average day-ahead prices were 19.83 pence per thermduring

264、 2003,30 percent higher than in 2002.Electricity consumption from Germanys public grid rose to493.6 billion kilowatt-hours(kWh)from 483.8 billion kWh inthe previous year.Most of Germanys electricity was pro-duced at nuclear(156.4 billion kWh)and coal-fired(265.9 bil-lion kWh)generating facilities.Re

265、newables accounted for justunder 5 percent of the countrys resource mix.Energy Industry Preliminary estimates for 2003 put Germanys consumptionof primary energy at about 489 million metric tons of coalequivalent(MTCE),essentially unchanged from 2002.At8.9Centigrade(C),the annual average temperature

266、in Germany was 0.6C below the prior-year figure.Though lowtemperatures meant that more energy was consumed to heathomes and small businesses,these increases were offset by lower industrial consumption due to Germanys weakeconomy.The various energy sources had roughly the sameshare of total energy co

267、nsumption as in the prior year.The reduced availability of electric generating facilities duringthe summer heat wave combined with the decommissioningprograms of several major generating companies to drive upwholesale electricity prices in 2003.Significantly higher fuelcosts were also a factor in th

268、e increase.The dollar-denomi-nated Rotterdam coal price nearly doubled.Oil and gas pricesalso trended higher.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary33The U.S.Midwest region participated only to a limited degreein the robust growth of

269、the U.S.economy.In addition,theoverbuilt generation market continued to exert downwardpressure on the margins of electricity suppliers.However,wholesale electricity prices in the U.S.Midwest region recov-ered from low levels in 2002 due to higher and volatile whole-sale gas prices,averaging$37.2 per

270、 MWh in 2003,well abovethe average 2002 price of$26.7 per MWh.Acquisition of Ruhrgas CompleteOn January 31,2003,E.ON reached an out-of-court settlementwith the nine companies that had filed law suits in stateSuperior Court in Dsseldorf against the ministerial approvalof E.ONs acquisition of Ruhrgas.

271、E.ON completed its acquisi-tion of RAGs Ruhrgas shares the same day.By early March2003,we had acquired 100 percent of Ruhrgas for a total of10.2 billion.Ruhrgas became a fully consolidated E.ON com-pany effective February 1,2003.Ruhrgas gives us a strong competitive position in the Euro-pean gas mar

272、ket,ideally complementing our existing gasoperations,which are primarily on the downstream side.Along with our fully integrated electricity business,we are nowa major player along the entire gas value chain:from pro-curement to wholesaling,and from transmission to retailing.In compliance with the te

273、rms of the ministerial approval ofE.ONs acquisition of Ruhrgas:E.ON Energie and Ruhrgas sold their respective 22 per-cent equity interests in Bayerngas to municipal utilitiesin Munich,Augsburg,Regensburg,and Ingolstadt and tothe City of Landshut;E.ON Energie sold its 80.5 percent stake in Gelsenwass

274、erto a joint venture company owned by two municipalutilities,Stadtwerke Dortmund and BochumerStadtwerke;andE.ON Energie and Ruhrgas sold their combined 32.4 per-cent equity interest in swb,an energy utility headquar-tered in Bremen,to EWE.In late 2003,we concluded agreements to divest our27.4 percen

275、t stake in EWE and our 42.1 percent stake in VNG.EWEs two principal shareholders,Energieverband Elbe-WeserBeteiligungsholding and Weser-Ems Energiebeteiligungen,acquired our EWE stake by exercising their preemptive rights.EWE purchased 32.1 percent of our VNG stake.Pursuant tothe conditions of the m

276、inisterial approval,the remaining10 percent stake was offered to municipal authorities ineastern Germany at the same price.The municipal authori-ties accepted the offer and purchased the 10 percent VNGstake.With these transactions,we completed the disposals requiredunder the ministerial approval of

277、our acquisition of Ruhrgasbefore the expiration of the February 2004 deadline.In Germanys liberalized gas markets,what counts is scale,competitive prices,flexible delivery terms,and flawlesslyreliable service.But above all its about the people andpartnerships that are the foundation of successful bu

278、si-ness relationships.Thats why customer proximity andcustomer service are so important to us.Dr.Michael Pfingsten,Member of the Board of Management,Ruhrgas AGE.ON Continues Systematic Transformation intoFocused Energy GroupIn just a few years,E.ON has transformed itself from a con-glomerate into a

279、focused power and gas group.Following theacquisition of Ruhrgas,we further strengthened our coreenergy business by making targeted acquisitions and by sys-tematically executing our focus strategy.We sold an 18.08 percent stake in Degussa to RAG undera public tender offer.E.ON now owns 46.48 percent

280、ofDegussas stock and accounts for Degussa by the equitymethod.Viterra sold Viterra Contracting(a heating serviceprovider)and Viterra Energy Services(a residential servicescompany).We sold our 15.9 percent shareholding in Bouygues Telecom,Frances third-largest wireless communicationscompany,to the Bo

281、uygues Group.Sydkraft increased to 97.5 percent its ownership interestin Graninge,Swedens fourth-largest energy utility.E.ON Energie obtained majority interests in two Czechregional electric utilities:JME,in which it now owns85.7 percent,and JCE,in which it now owns 84.7 percent.Powergen agreed to t

282、erms for the acquisition of Mid-lands Electricity,an electricity distribution companyoperating in the United Kingdom,with its U.S.owners,Aquila and FirstEnergy.Electricity and Gas Sales Substantially Higher Due to Acquisitions Our electricity and gas sales rose substantially year-on-year.The Powerge

283、n and Ruhrgas acquisitions played a key role inthe increase.But even when measured against prior-yearnumbers that include pro forma results of the acquired com-panies,electricity sales increased 16 percent to 387.6 billionkWh,and gas sales climbed 11 percent to 803.7 billion kWh.Letter to Shareholde

284、rs Report of the Supervisory Board Year in Review ontop Review of Operations34Review of OperationsThe increase in reported sales at E.ON Energies electricitybusiness reflects the fact that several companies becameconsolidated subsidiaries in the second half of 2002 and in2003(see pages 8081 for more

285、 information).In the periodunder review,and particularly in the first quarter,gas salesat E.ON Energie and Ruhrgas benefited from average tem-peratures below those of the prior year.Theintegration ofTXUs retail business was the main factor behind the sub-stantial increase in Powergens electricity an

286、d gas sales inthe United Kingdom.LG&E Energys sales volumes wereessentially unchanged from 2002.Electricity and Gas ProcurementE.ON Energie met around 58 percent or 162.7 billion kWh(prioryear:59 percent or 155.7 billion kWh)of its requirementswith electricity from its own generation assets.The comp

287、anypurchased 117.6 billion kWh of electricity from jointly ownedgenerating facilities and from outside sources,a roughly11 percent increase from the prior-year figure of 106.2 billionkWh.Total power purchases rose 7 percent to 280.3 billionkWh in 2003 from 261.9 billion kWh in 2002.As in 2002,Ruhrga

288、s purchased natural gas from German pro-ducers and from five export countries in 2003.Of Ruhrgasstotal gas purchases of 623.4 billion kWh for 12 months of 2003,Russia and Norway were the companys two biggest suppliers,accounting for 31 percent and 29 percent,respectively.TheNetherlands accounted for

289、 16 percent,Denmark for 3 percent,and the United Kingdom for 4 percent.German productionaccounted for 17 percent of purchases.Powergen UKs own generating fleet accounted for 35.9 billionkWh or about half of the companys total electricity procuredof 74.3 billion kWh.Powergen UK purchased 38.4 billion

290、 kWhfrom outside sources or joint venture owned plants.LG&EEnergys proprietary and leased generation output was44.1 billion kWh.Its purchases amounted to 4.8 billion kWh.Consolidated Sales up ConsiderablyConsolidated sales rose 27 percent relative to the previousyear.Sales in our core energy busines

291、s nearly doubled,pri-marily owing to the inclusion of Ruhrgas and Powergen.(Ruhrgas was not part of the E.ON Group in 2002,and Power-gen became a consolidated E.ON company on July 1,2002.)Inaddition,the results of several regional utilities in Germany,Eastern Europe,and Northern Europe were included

292、 in E.ONEnergies consolidated results for the first time,enabling thecompany to grow sales substantially.The deconsolidation ofDegussa,which we have accounted for by the equity methodsince February 1,2003,reduced the sales we report in ourother activities segment by approximately 10.8 billion.We gen

293、erated 39 percent of our consolidated sales outsideGermany in 2003,compared with 45 percent in 2002.Billion kWhTotal:803.7Gas Sales in 2003132.3E.ON Energie15.7LG&E Energy102.4Powergen553.3Ruhrgas(11 months)Billion kWhTotal:387.6Electricity Sales in 2003269.4E.ON Energie46.2LG&E Energy72.0PowergenAd

294、ditional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary35E.ON Energie generated substantially higher sales in the 2003financial year.Contributing to the advance were consolidationeffects relating to the full-year inclusion of several subsidiariesas wel

295、l as a weather-driven increase in gas sales volume andthe further recovery of electricity prices in Germany.Between February 1 and December 31,2003,Ruhrgas gener-ated sales of 12.1 billion.This substantial figure is attributa-ble to weather-driven volume growth and to the increase inthe natural gas

296、tax that took effect on January 1,2003.Demand spikes also helped to boost revenues.Powergens sharp increase in sales is attributable to the full-year inclusion of TXUs retail business,which was acquired inOctober 2002.7.9 billion of sales were generated in theUnited Kingdom and 2 billion at LG&E Ene

297、rgy.At our other activities,Viterras sales were down from thecomparable prior-year figure.The main reasons were reducedsales at Viterra Baupartner,which was in the process of beingphased out,and a reduction in rental revenues due to thesale of housing units.Effective February 1,2003,Degussa hasbeen

298、accounted for by the equity method in line with E.ONs46.5 percent shareholding in the company.For this reason,sales recorded for Degussa comprise the companys January2003 results only.+/%+18+871184+27 in millionsE.ON EnergieRuhrgasPowergenOther/ConsolidationCore energy businessViterraDegussaOther ac

299、tivitiesConsolidated sales200322,57912,08529,89427344,2851,08599442,07946,364200219,1424,42238123,6451,21411,76512,97936,6241Includes electricity and gas taxes.2February 1 to December 31.3July 1 to December 31.4January 1 to 31.Consolidated Sales1E.ON Again Posts Record Internal Operating ProfitConso

300、lidated internal operating profit for 2003 rose 20 per-cent to 4.6 billion.Our core energy business,whichaccounts for more than 90 percent of our earnings,grewinternal operating profit by 39 percent.The increase is primarily due to the inclusion of Ruhrgas and Powergen,though the two companies also

301、made a distinctly positivecontribution to consolidated internal operating profit evenafter financing costs,which are included in the internaloperating profit reported under Other/Consolidation.Earn-ings growth in our core energy business more than offsetthe earnings shortfall of approximately 500 mi

302、llion relatingto the deconsolidation of Degussa.E.ON Energie posted a substantial increase in internal oper-ating profit.Positive effects from the inclusion of newly con-solidated companies in and outside Germany,together withoperating improvements,more than counterbalanced thecharges relating to th

303、e adoption of SFAS 143 to account forprovisions for nuclear plant decommissioning and to balancearea settlement payments(see page 82 for more information).Factors behind Ruhrgass solid earnings performance includevolume growth,as well as demand spikes in the first quarter,the optimal utilization of

304、its procurement portfolio,and thefavorable development of heating oil prices.Full-year consolidation and the enhanced retail businessincluding the former TXU operations were the main driversbehind the sharp rise in Powergens internal operating profit.The U.K.business contributed 452 million and the

305、U.S.busi-ness 218 million.The residual figure comprises Powergensinvestments in the Asia-Pacific region as well as corporateinterest and other costs.+/%+10+39+4547+20 in millionsE.ON EnergieRuhrgasPowergenOther/ConsolidationCore energy businessViterraDegussaOther activitiesConsolidated internal oper

306、ating profit420033,0581,12816206934,11329515734524,56520022,78232921522,9592036558583,8171February 1 to December 31.2July 1 to December 31.3Accounted for by the equity method effective February 1,2003.4Non-GAAP financial measure;see reconciliation to net income on page 36.Consolidated Internal Opera

307、ting ProfitThe Other/Consolidation segment contains the results ofcentral Group financing activities and equity interests man-aged directly by E.ON AG,E.ON AG itself,as well as consoli-dation effects at the Group level.The decline in this seg-ments internal operating profit is due above all to a mar

308、ked-ly higher interest expense,primarily as a result of financingcosts relating to the Powergen and Ruhrgas acquisitions.Viterras internal operating profit rose considerably.Positivefactors included the substantial increase in housing unitssold and the phaseout of Viterra Baupartner,a loss-makingbus

309、iness line.Under the equity method,46.5 percent ofDegussas after-tax earnings are included in E.ONs internaloperating profit for all periods after February 1,2003.For thisreason,Degussas reported internal operating profit for 2003is well below the figure for 2002.Letter to Shareholders Report of the

310、 Supervisory Board Year in Review ontop Review of Operations36Review of Operations+/%+20+1766+67 in millionsConsolidated internal operating profit Net book gains Restructuring expenses Other nonoperating earnings Income/(loss)from continuingoperations before income taxes and minority interests Incom

311、e taxesMinority interestsIncome/(loss)from continuingoperationsIncome/(loss)from discontin-ued operations,net Cumulative effect of changes inaccounting principles,netConsolidated net income20034,5651,2574791955,5381,1244643,9501,1374404,64720023,8171,0713315,3167596626237203,3061912,777Consolidated

312、Net IncomeNet Book Gains Surpass Substantial Prior-Year FigureNet book gains in 2003 resulted mainly from the sale of ourinterest in Bouygues Telecom to the Bouygues Group(840 million)and the sale of a roughly 18 percent stake inDegussa(168 million).E.ON Energie recorded a net bookgain of approximat

313、ely 165 million on the sale of securities.Further book gains of approximately 160 million mainlyreflect E.ON Energies disposal of shares in swb and aregional utility located in eastern Germany and Powergenssale of interests in certain electric generating facilities.Thesegains were partially negated

314、by a book loss of 76 million onthe disposal of a 1.9 percent stake in HypoVereinsbank inMarch 2003.The substantial prior-year figure mainly reflectedthe sale of certain Schmalbach-Lubeca businesses and ourSTEAG stock,together with net book gains recorded at E.ONEnergie in connection with the breakup

315、 of Rhenag and thesale of shares in Sydkraft and in Watt,a Swiss energy utility.Our strength is that we have established pathways to ourcustomers in both power and gas service.Whats more,natural gas has bright growth prospects.The relation-ships we have with our more than 1 million customers in nort

316、hern Germany are founded on partnership,com-petitively priced energy products,and,above all,on ourpresence in the communities where our customers liveand do business.Hans-Jakob Tiessen,Chairman of the Board of Management,E.ON Hanse AGOther nonoperating earnings chiefly reflect unrealized incomefrom

317、the required marking to market of derivatives at E.ONEnergie and Powergen(494 million).This was offset by theimpairment charge taken by Degussa in its Fine Chemicalsdivision,which reduced other nonoperating earnings by 187 million in line with our 46.5 percent shareholding inDegussa.The substantial

318、loss recorded in the prior year wasprimarily attributable to the impairment charge taken onthe goodwill acquired in the Powergen transaction and tothe valuation allowances on our HypoVereinsbank sharesand on other securities.Restructuring expenses in 2003 were recorded mainly atE.ON Energie and were

319、 primarily attributable to the creationof two regional utilities,E.ON Hanse and E.ON Westfalen Weser,and to payments for additional early retirement measures(358 million).Additional restructuring expenses wererecorded at Powergen in connection with theintegrationof TXU activities(121 million).Restru

320、cturing expenses inthe prior year were recorded mainly in our chemicals business.Additional Information Consolidated Financial Statements Other Directorships Major Shareholdings Glossary37Income from continuing operations before income taxes andminority interests rose by 6.3 billion.In the prior yea

321、r,this figure was negatively impacted by the substantial lossreported under other nonoperating earnings.In 2003,the E.ON Groups continuing operations include a taxexpense of 1,124 million.In 2002,we recorded a tax benefitof 662 million,of which 613 million was related to therelease of deferred taxes

322、,resulting in particular from valua-tion allowances on securities held by E.ON and from losseson securities sold by E.ON.In addition to the tax expense onour earnings,a number of factors were behind the increasein our tax burden in the year under review.Changes in taxrates and tax laws that took eff

323、ect in 2003 resulted in a taxexpense of 60 million.The valuation allowances to deferredtaxes on loss carryforwards amounted to an expense of543 million,of which 488 million resulted from the delayin the ability to utilize loss carryforwards accrued in Germany(see Note 8 to the Consolidated Financial

324、 Statements fordetails).Minority interests declined,mainly due to the deconsolida-tion of Degussa.Income from continuing operations rose to 4 billion.In theprior-year period,this item was negatively impacted by thesubstantial loss reported under other nonoperating earnings.Income from Discontinued O

325、perations Reflects Substantial Gains on DisposalsIncome from discontinued operations in 2003 mainly reflectsthe book gains recorded on the sale of Gelsenwasser andViterra Energy Services.The prior-year figure also consistedprimarily of gains on the disposal of operations,includingVAW aluminium,VEBA

326、Oel,Stinnes,and certain operationsdivested by Degussa(an overview of discontinued operationscan be found on pages 133ff of this report).The cumulative effect of changes in accounting principles isprimarily attributable to the adoption of the SFAS 143,“Accounting for Asset Retirement Obligations”(com

327、mentaryon SFAS 143 can be found on pages 167ff of this report).Thefigure for the previous year includes the reversal of negativegoodwill in the amount of 191 million relating to our formerAluminum segment pursuant to SFAS 142,“Goodwill and OtherIntangible Assets.”Consolidated net income rose conside

328、rably.Contributing factors included appreciable operating improvements,sub-stantial gains on disposals,and the absence of significantnonrecurring charges.Proposed Dividend Increased to 2 per shareE.ON AG prepares its Financial Statements in accordance withGerman commercial law and the German Stock C

329、orporationAct.E.ON AGs net income for 2003 amounts to 1,924 million.After transferring 612 million to other retained earnings,netincome available for distribution totals 1,312 million.At the Annual Shareholders Meeting on April 28,2004,man-agement will propose that net income available for distribu-

330、tion be used to pay a cash dividend of 2 per share,a 14 per-cent increase from the cash dividend paid in 2003.The higherproposed dividend in particular reflects our solid earningsperformance.This would mark the fifth year in a row that wehave paid out a higher dividend.We believe this makes E.ONstoc

331、k more attractive to investors.in millionsProperty,plant,and equipmentFinancial assetsFixed assetsReceivables from affiliated companiesOther receivables and assetsLiquid fundsNon-fixed assetsTotal assetsStockholders equitySpecial items with provision componentProvisionsLiabilities to affiliated comp

332、aniesOther liabilitiesTotal stockholders equity and liabilities Dec.31,200319122,26622,4576,5241,5882518,36330,82011,6574152,12614,1702,45230,820Dec.31,200219420,06120,2556,9083,533410,44530,70010,8754701,83014,6832,84230,700Financial Statements of E.ON AG(Summary)in millionsIncome from equity inter

333、estsInterest income(net)Other expenditures and income(net)Income/(loss)from continuing operations before income taxes and minority interestsTaxesNet incomeNet income transferred to retained earningsNet income available for distribution20033,018793302,1952711,9246121,31220021,0223273,4502,1014361,6655231,142Income Statement of E.ON AG(Summary)Letter to Shareholders Report of the Supervisory Board Y