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Monitoring change

Integrated Report 2017Condensed version

Group key figures

Key non-financial figures

2017 2016Change

in %

Specific CO2 emissions from electricity generation (grams per kWh) 504 563 −10.5

Installed electrical capacity (in MW)

thereof Renewable 426 374 13.9

thereof Conventional 947 1,221 −22.4

Unavailability of networks (in minutes) per customer 5.8 5.5 5.5

Natural fluctuation (in %) 2.1 –

Health rate (in %) 94.6 95.2*

Accident rate (accidents per 1,000 employees) 8.1 10.7 −24.3

Customer satisfaction quality index 2.23 –

Information security training rate (in %) 79 –

Employees trained in corruption prevention 3,700 –

The accounting methods applied may result in rounding differences of + / − one unit (euro, per cent, etc.)

* Industry average for 2016

Key financial figures

in millions of euros 2017 2016Change

in %

Turnover 8,250.5 7,566.3 9.0

Operating EBITDA 937.4 969.9 −3.4

Operating EBIT 503.4 534.6 −5.8

EBIT 503.8 649.2 −22.4

Earnings in the period 256.1 332.9 −23.1

Payments for investments (total) 525.6 469.2 12.0

Cash flow from operating activities 655.8 471.7 39.0

Total assets 9,097.1 8,435.2 7.8

Equity ratio in % 22.9 23.0

Net financial position 3,311.3 3,399.7 −2.6

Employees (average) 9,134 9,048 1.0

Employees (full-time equivalent, FTE) 8,651 8,607 0.5

The accounting methods applied may result in rounding differences of + / − one unit (euro, per cent, etc.)

Company

02 Interview with the Board of Management06 Report from the Supervisory Board08 Our strategy

Our resources

11 Combined non-financial statement of EWE AG

12 Key issues14 Responsible management17 Environment20 Plants and networks22 Employees25 Know-how26 Social aspects and relationships28 Finance

Combined management report and consolidated financial statements

32 Combined management report62 Consolidated financial statements

More information

70 About this report71 Responsibility statement72 Independent auditor’s report78 Independent auditor’s limited

assurance report 80 GRI content index84 List of abbreviations85 Index86 Dates in 2018, Legal notice, Disclaimer

87 EWE Group five-year overview

This report is a short version of the EWE Group integrated report 2017. The full report is available for download in PDF format at the following address: https://www.ewe.com/en/investor-relations/publications/annual-reports. The notes to the consolidated financial statements are only provided in the online.

Content

References to additional information in the report

Hanover

BremenOldenburg

GERMANY

Rügen

Kayseri

Istanbul

Bursa

TURKEY

Poznań

Międzyrecz

POLAND

Customers

855,000Telecommunications customers (2016: 777,000)

1.4million electricity customers (2016: 1.3 million)

1.8 million gas customers (2016: 1.8 million)

Around 9,000 employees generate annual turnover of 8 billion euros at EWE, making us one of the larg-est municipal companies in Germany. Our customers in north-west Germany, Brandenburg and on Rügen benefit from innovative energy products and high- performance telecommunications. EWE has also made a name for itself in Poland and Turkey as a reliable supplier and driver of modern energy markets. The Group, based in Oldenburg, has its own power generation capacity based on renewable and conventional energy sources. Furthermore, EWE companies operate advanced, secure networks for electricity, natural gas and telecommunica-tions. Nationwide IT solutions complete our portfolio.

Our company

The Ems-Weser-Elbe region

We have been active in our core regions for more than 80 years. Today, we offer an integrated product range consisting of electricity, gas, telecommunications and information technology services.

Bremen (swb)

since 2009 part of EWE Group

Brandenburg / Rügen

since 1990

Turkey

since 2007

Poland

since 1999

Employees

9,134Average in 2017 (2016: 9,048)

Brandenburg

Our business modelEWE Group

Mor

e in

form

atio

n ab

out t

he c

ompa

ny p

64%Weser-Ems-Energie-beteiligungen GmbH

20%Energieverband Elbe-Weser Beteiligungsholding GmbH

6%EnBW Energie Baden- Württemberg AG

10%Treasury shares EWE AG

BWhere we are headedEWE – The leading energy company in northern Germany.

How we create value

Segments

Renewables, Grids and Gas Storage

Sales, Services and Trading International swb Group Central Division

Environment Plants and Networks Employees Know-how Social aspects and

relationships Finance

Resources

Electricity

■■ Generation■■ Trading■■ Networks■■ Sales

Gas

■■ Procurement■■ Storage■■ Trading■■ Networks■■ Sales

Telecommunications

■■ Networks■■ Sales

Information technology

■■ Consulting■■ System integration ■■ System management

8,250.5Revenue (millions of euros) excluding electricity and energy taxes (2016: 7,566.3 million euros)

Value creation Distribution of value creation

in millions of euros 2017 2016

Material 6,333.6 5,761.7

Staff 711.9 722.5

Interest 158.7 219.5

Taxes 128.6 119.5

Mr Dohler, you are a proven energy expert with years of experience in the industry. You have been the Chief Executive Officer of EWE for three months. Can you remember what your first impressions were of the company?

Stefan Dohler: I was impressed by the way the staff identified with the company in the first few weeks in which I spent a lot of time travelling around the business re-gion. They are committed to EWE. For me, this ties in closely with the proximity of EWE to its customers. We are always there to help, be it with energy or telecom-munications. I thought that was something very special. Additionally, the degree of innovation of the staff caught my eye when I first arrived. Although focused on our core business, they are always thinking outside of the box.

Let us reflect a little before I ask you to look outside of that box. The dismissal of the CEO and other vacant seats on the Board of Management, not to mention suspicions of corruption in subsidiaries. How is EWE faring?

Stefan Dohler: My two colleagues Wolfgang Mücher and Michael Heidkamp have had a tough and difficult year. The effort they made is not something you can expect from just anyone. The allegations have been investigated and many have proven unfounded. They have also established a rules system for all personnel.

Are regulations a magic bullet?

Stefan Dohler: For me, the most important thing is that compliance is a cultural aspect. I can have as many rules as I want, yet compliance takes place in the head and heart. The most helpful thing is to use your brain. When following any rules,

Interview with the Board of Management

The Board of Management of EWE AG:

Michael Heidkamp Chief Sales Officer

Stefan Dohler Chief Executive Officer

Wolfgang MücherChief Financial Officer

(from left)

our employees should ask themselves the following question: What does compli-ance mean here and now in my everyday work? A culture like this works not by pointing the finger, but by helping out.

Let us talk about business operations. In the annual report, you rate the current net income for the year as good to satisfactory. Where did you perform better than expected? And where did you not fare as well?

Wolfgang Mücher: 2017 was a good business year for EWE. And as 2016 was also a good business year, we can be satisfied on balance. When we look at the individual lines of business, we see that our grid business performed exceptionally well. 2017 was also a good wind year, although our gas storage business did suffer the occa-sional setback. In terms of marketing, we made strategic investments and were therefore able to attract a number of new customers throughout the Group. This had an impact on our operating EBIT. In spite of a small setback in the later stages, we achieved outstanding results with regard to trading. Despite some highly chal-lenging general conditions, our international interests performed better than we expected at the start of the year. Even swb can look back on a positive business year, not least due to the avoided grid fees. However, the situation in conventional gen-eration did necessitate a valuation allowance for the power plants in Bremen.

What is happening with your fossil fuel power plants?

Stefan Dohler: When it comes to fossil fuel power plants, I am happy to be at EWE as the major operators of power plants are under significantly more pressure. There will certainly be excess capacity in the market for a while yet. We will continue to see price pressure in wholesale. Fortunately, we have power plants in Bremen with long-term leases, so we will not feel this price pressure directly for at least some of the quantity of electricity.

And renewables? How is EWE coping with the low feed-in remuneration that will result from the invitations to tender?

Stefan Dohler: Firstly, I am not surprised by the price level as it was formed through competition. Secondly, our customers want more green energy and we provide our customers with what they want. Thirdly, we know that the German government has set a target of 65 per cent renewables by 2030. A very large proportion of this will be from wind energy and a very large proportion of that energy will be generated in north-western Germany. This means that we can play a key role in wind energy. Therefore, it must not be our objective to invest as much capital as possible in wind farms; instead, we can ensure their development, construction, operation and inte-gration into the energy system. The capital can even come from partners, be it pen-sion funds or public participation.

“ We have to do it well and we have to be able to stem it.”

C O M PA N Y 3

Is the sale of electricity, gas and high-speed Internet still the core business of EWE?

Michael Heidkamp: Looking back at 2017, the answer is a resounding yes. The major-ity of our customers purchases our traditional products. We are happy to report sig-nificant growth in our electricity customers. This shows that we are bucking the trend.

Will the same be true in the future?

Michael Heidkamp: We are certain that the delivery of energy will remain the core element of our products. But we are working to merge our business with commod-ities into services or better system services. In the future, we want to be able to provide our customers with all household-related products from a single source. The world is becoming increasingly complex for customers, so we are making things simpler for them and in doing so becoming unique. Our corporate strategy can be summarised as follows: we make it bright for customers (electricity), we make it bright and fast (Internet), we make it bright, fast and warm (gas) and we make it bright, fast, warm and secure (household technology). We are developing a modular product range that is no longer focused on merely supplying energy. Additionally, we are working on a new IT platform so as to remain competitive in the future.

How important is regionality in EWE’s business model?

Michael Heidkamp: Most of the people who live in the regions are our customers. And it should remain that way. Regionality is important to these customers, as reflected by the growing frequency of visits to our shops. We are also creating value in the region. We are investing 1.2 billion euros in the expansion of the fibre optic network in order to speed up the region. We are making sure that the rural areas on our doorstep are not being left out.

How do your activities in Poland and Turkey fit with regionality?

Michael Heidkamp: Regionality is not the be-all and end-all to us. We are also seek-ing out business opportunities in new markets. We have a business region in Branden-burg / Rügen and we are operating in a market in Poland. Poland is the country with the strongest economic growth in Central Eastern Europe. By 2024, normal house-holds there will still be subject to tariff approval, yet even now competition for business customers is free. We will export the things we can already do well in our domestic market.

“ We are creating value in the region.”

Stefan Dohler, Chief Executive Officer

Michael Heidkamp, Chief Sales Officer

4 EWE Integrated Report 2017

How is your business in Turkey faring?

Wolfgang Mücher: Our colleagues in Turkey have done some excellent work. How-ever, our business has suffered due to the exchange rates: gas prices for customers are in the local currency and essentially set by the government, whereas purchasing is based on the price of oil and is carried out in dollars. It is also a business that is hard to control from here in Germany.

How does the 2018 business year look?

Wolfgang Mücher: Investments are a challenging issue. We have a number of invest-ments on the horizon. Market region transition, fibre optic network expansion, elec-tricity grid expansion and new business models. Regulatory effects will also have a considerably negative impact on our income from network operations in 2018. Nevertheless, we feel we are in a good position, although we are aware that we need to increase our efficiency further.

Mr Dohler, earlier on in your career you went to sea. Looking at EWE now, is it in calm waters or in need of a change of course?

Stefan Dohler: Last year was stormy. Yet our ship is robust and stable, capable of braving the high seas. This is due to our staff who, as we have already mentioned, have done an extremely good job. The Board of Management will soon be filled and then we will compare our current two-year-old strategy with our latest findings from the market. We aim to reveal our new – or should I say adjusted – course to the public in summer.

Can you at least say something about the rough direction of EWE’s new course?

Stefan Dohler: As Mr Heidkamp has already indicated, one focal point will be con-centrating on the needs of our customers. We do not want to tell the world what it needs – that does not work any more. Therefore, we will listen closely over the next few weeks and then answer two questions: Is our current business doing as well as we think? And what can we do better in this business that will define our future? And the second question: How quickly are we driving innovation, for in-stance in terms of the results of the enera project or our major investments in the fibre optic network? This needs entrepreneurial courage. We have to do it well and we have to be able to stem it. In other words, we have to have the talent to speed up and slow down simultaneously as if we were rally drivers, not seafarers.

Thank you for the interview.

The interview was held by the independent editor Wolfgang Witte.

Wolfgang Mücher, Chief Financial Officer

C O M PA N Y 5

Dear Sir or Madam,

Over the course of the 2017 business year, the Super-visory Board continuously monitored the company’s management and received regular, comprehensive reports from the Board of Management on the com-pany’s position, all significant events and company performance, both verbally and in writing.

The Supervisory Board thoroughly discussed all matters requiring its approval either by law or the company’s articles of incorporation and made the necessary decisions. In a total of nine meetings in 2017, the Supervisory Board dealt in particular with the annual and consolidated financial statements, the current results of operations (including the risk management system), investments and their financing, and individual transactions of particular importance, and passed resolutions on the matters assigned to it by law or the articles of incorporation. The Supervisory Board provided guidance regarding the company’s strategic focus, regarding its commit-ment to the Turkish market in light of the current po-litical situation and regarding resolutions on planned investments in the growing field of wind energy. Among other items on its agenda, the Supervisory Board approved the awarding of contracts for per-missible non-audit services to the auditor by provid-ing written consent in lieu of holding a meeting.

Additionally, the Supervisory Board received re-ports on the new statutory requirements regarding non-financial reporting and on how the Board of Management plans to structure the future non- financial statements of EWE AG. In this regard and going beyond its statutory duty, the Supervisory Board decided to have the content of the non- financial statements audited by the audit firm Ernst & Young with limited assurance.

Additionally, the Supervisory Board passed resolu-tions to terminate the appointment and dissolve

the employment contract of the Chairperson of the Board of Management Matthias Brückmann. Addi-tionally, the Supervisory Board passed resolutions to fill vacant seats on the Board of Management and appointed Mr Stefan Dohler as Chairperson of the Board of Management. Ms Marion Rövekamp has been appointed Head of Human Resources and Dr Urban Keussen has been appointed Head of Tech-nology. The newly appointed members of the Board of Management all take up office in the 2018 busi-ness year as the appointments were made for dates in the 2018 business year. The Group auditing department provided the Supervisory Board with regular reports on the audits carried out. External forensic investigations have been commissioned following anonymous reports of legal violations, especially in connection with donation promises and the illegal awarding of contracts. The results of the investigation were the subject of intense scru-tiny by the Supervisory Board.

The Supervisory Board of EWE AG has undergone the following changes since 1 January 2017: Dr Frank Mastiaux, Mr Peter Meiwald and Dr Stephan- Andreas Kaulvers have stepped down as represen-tatives of the shareholders on the Supervisory Board. Mr Bernd-Carsten Hiebing, Mr Henning R. Deters and Mr Jürgen Löcke have been appointed to the Supervisory Board as representatives of the shareholders. Mr Bernhard Bramlage has taken over from the previous Chairperson of the Supervisory Board. Mr Jürgen Löcke has been elected a new member and Chairperson of the finance and audit committee. Additionally, Mr Wolfgang Behnke stepped down from the Supervisory Board as at the end of 31 December 2017.

The Supervisory Board thanks its former members for their committed, constructive work and for their efforts to further the interests of the company.

Report from the Supervisory Board


Together with the Board of Management, the Super-visory Board committees prepared the meetings and the resolutions of the Supervisory Board. All in all, the steering committee met 14 times, the work-ing committee five and the finance and audit com-mittee a total of four times. No meetings of the mediation committee were held pursuant to Sec-tion 27 (3) MitbestG.

The annual financial statements of EWE AG pre-pared by the Board of Management in accordance with the German Commercial Code (HGB), the con-solidated financial statements prepared in accord-ance with IFRS and the combined management report for EWE AG and the Group for the 2017 busi-ness year have been audited by the accounting firm Ernst & Young GmbH, which was elected as auditor at the Annual General Meeting on 16 May 2017, and subsequently hired by the Supervisory Board. The auditors’ reports were distributed to the members of the Supervisory Board, officially acknowledged and incorporated into the discussion and review of the annual and consolidated financial statements. The auditors participated in the meeting of the finance and audit committee on 15 March 2018 and the Supervisory Board meeting dealing with the financial statements on 12 April 2018, where they reported on the major findings of their audit and were available to answer questions. Having conclu-sively examined the annual financial statements and consolidated financial statements prepared by the Board of Management, the management report for EWE AG and the Group management report as well as the proposal for the appropriation of net prof-it, the Supervisory Board expresses no objections. The Supervisory Board today adopted the annual financial statements, approved the consolidated financial statements and concurred with the Board of Management’s proposal for the appropriation of net profit.

The Board of Management also prepared a report as required by Section 312 AktG on relationships with affiliated companies as per Section 313 AktG. The auditors have audited this report and issued the following auditor’s opinion:

“On the basis of our audit and in our professional opinion, we confirm that:

1. The factual statements of the report are correct

2. The consideration paid by the company for the transactions mentioned was not inappropriately high.”

Each member of the Supervisory Board was provid-ed with a copy of the annual financial statements and management report, the consolidated financial statements and Group management report, as well as the audit reports from the company’s auditor. After our own review of the report, the Supervisory Board concurs with the results of the audit and ex-pressly states that it has no objections to the state-ments by the Board of Management at the end of the report on transactions with affiliated companies.

The Supervisory Board would like to thank and ex-press its appreciation to the Board of Management, all employees and the members of the works coun-cils for their hard work in the 2017 business year.

Oldenburg, 12 April 2018

The Supervisory Board

Bernhard Bramlage Chairperson

C O M PA N Y 7


Our strategyEWE offers all the conditions needed for energy, telecommunications and mobility markets to converge. We also bring this expertise and experience to the enera project. This project aims to show how the energy transition can work in a region where electricity generation from renewable sources is already double consumption at times.

How can we reliably provide our custom-ers with an increasing level of renewable energy?

How can life with more and more renew-able energy be made more convenient for our customers?

Everyone in the energy industry is asking these two questions. EWE hopes to provide answers through enera: with funding from the German Federal Ministry for Economic Affairs and Energy, more than 30 companies from across Germany have come together under this name to form a research con-sortium with two goals.

■■ In the model region around Aurich, Wittmund and Friesland, enera is building a ‘power grid of the future’ that will allow energy producers and consumers to ensure a stable supply together with network operator.

■■ Additionally, enera is testing and developing new products for private households in the model region. These products are based on data gener-ated by networking the parties named above.

Smart meters

As a first step, 29,000 households and companies in the model region are having a smart meter in-stalled. Current legislation requires that customers who receive at least 10,000 kilowatt-hours of elec-tricity per year are equipped with a smart meter. However, most private households do not reach this limit. For that reason, enera is covering a large pro-portion of the costs incurred.

A smart meter gives customers a detailed, up-to-the-minute overview of how much electricity their ap-pliances and devices have consumed. This makes it possible to identify ‘power guzzlers’. Each device can also be operated using a mobile phone. For example, the home lighting system can be changed without having to go from lamp to lamp. Furthermore, the smart meter makes it possible to adjust power con-sumption in line with level of electricity generated by wind and solar power systems. Washing machines, tumble dryers and hot water boilers, for instance, can be turned on when there is a strong wind or at night, when less power is generally needed.

Anyone who not only uses electricity, but also gen-erates it or would like to provide other consumers with access to unused electricity from a domestic energy storage system or car battery can also con-trol this using the smart meter. In theory, it would even be possible to establish local electricity trad-ing. Last but not least, the communication interface of the smart meter can be used to protect against fire and water damage. The idea is that all of this should be as straightforward as possible so that it is accepted by as many customers as possible.

Against this background, enera is developing apps and tariffs that bring together a range of functions and that can be used to set automatic programmes. Although the power consumption habits of individ-ual customers follow complex rules (which can be transparent if desired), users should be able to operate this system very easily and without spend-ing too much time. The companies involved in the enera project stress that they do not want to be alone when it comes to developing new products.

C O M PA N Y 9

In order to attract as much creativity as possible to the model region, enera is therefore developing a platform where all interested developers can offer apps, for example. The development process behind the new energy supply of tomorrow will therefore have many fathers and mothers.

Smart grid

The smart meter not only makes life easier, but should also make the distribution of renewable electricity reliable and affordable.

A key reason why the model region was chosen is that coastal power generation today is already double peak consumption on some days. However, the cabling in this region dates back to a long time before the energy transition. These power lines were designed for a supply to meet the needs of households and businesses at that time. Today, they have to carry twice the amount of electricity during peak hours. The grid would have to be expanded at substantial cost unless it could be used more inten-sively with the existing copper cables.

Given these circumstances, enera is connecting a large number of sensors, digital measuring and con-trol devices, and flexible transformers to the grid in

order to obtain information about local network conditions and to strategically enhance its transport capability. The smart power grid therefore supplies not only power, but also important data that is indispensable for on-demand control.

Smart electricity trading

In order to provide customers with more and more renewable energy, enera is doing more than just digitalising the grid and embracing customers as active partners: a third important element is the integration of renewable electricity into the power market. This may sound complicated, but it essen-tially comes down to one very specific question: How reliable are our daily weather forecasts? After all, the sooner and more accurately everyone in-volved knows when (and where) sufficient quantities of renewable electricity will be available, or when (and where) it could become scarce, the better elec-tricity exchanges can be used to ensure intensive production processes, replenishing storage systems and providing an optimal supply to private house-holds in line with their needs. The power supply would thus follow the principles of the market econ-omy: the demand and supply of electricity would balance each other out, making it easier and easier to avoid strong price fluctuations in the future.

… with digital intelligence in meters, on the grid and in electricity trading.

For the energy supply of tomorrow

More information about enera see chap-ter ➞ Our resources, Know-how

Our resources

Pursuant to the German Corporate Social Respon-sibility Directive Implementation Act (CSR-RUG), the report contains the non-financial group state-ment of EWE AG in accordance with Section 315b et seq. of the German Commercial Code (HGB) which is compiled with the non-financial statement of the parent company in accordance with Sec-tion 289b et seq. HGB.

In doing so, we are tying our reports in with our previous sustainability reports. We report on how we create value for our company, the environment and society in the section entitled ‘Our resources’. As part of a materiality analysis, we redefined the non-financial aspects of relevance to our reporting in the 2017 business year. The identified aspects and the materiality analysis process are also pre-sented in this section. All information that is part of the non-financial statement is marked with the symbol NFS . GRI 102-49

Reporting boundaries

Unless indicated otherwise, all disclosures and figures in the non-financial reports concern the 2017 business year (1 January to 31 December), as do the financial reports. The EWE Group comprises EWE Aktiengesellschaft (also referred to as EWE AG), an ‘Aktiengesellschaft’ (public limited company) incorporated under German law, as well as its subsidiaries. If the non-financial statement deviates from the basis of consolidation, a footnote will define the scope of consolidated Group companies. Due to the varying materiality requirements of the GRI Standards and the CSR-RUG, no recognised sus-tainability reporting framework was used to prepare the non-financial statement. GRI 102-45

NFS

Combined non-financial statement of EWE AG

O U R R E S O U RC E S 11

1 The materiality analysis under the guidelines of the Global Reporting Initiative (GRI) contains an analysis of the effects of the activity of the company on non-financial aspects as well as an analysis of decision-usefulness for important stakeholders

Financial and non-financial factors form the basis of our corporate success. They enable us to generate economic, ecological and societal value, yet our business activities also have an effect on the environment and society. We determined the key aspects for EWE and our surrounding area in the 2017 materiality analysis.

Key issues

2017 materiality analysis

In 2017, we carried out a materiality analysis to identify the significant non-financial aspects for EWE and its stakeholders. Firstly, we utilised the non-financial aspects of the Group’s strategy, the issues from the 2016 sustainability report and the ten aspects of sustainability from the materiality analysis in 2013.

The relevance of this list of issues to the business of EWE has been evaluated by an internal team of experts. The evaluation was based on the CSR-RUG which is anchored by Section 315b et seq. HGB in conjunction with Section 289b et seq. HGB. Addi-tionally, we factored in the opinions of our stake-holders in order to evaluate the effects on the environment and society and in line with the ma-teriality criteria of the GRI Standards 1.

EWE employees from a range of Group roles surveyed a range of stakeholders and discussed and prioritised the list of issues.

Our relevant stakeholders: GRI 102−40

■■ Customers■■ Employees■■ Shareholders■■ Investors■■ Suppliers / business partners■■ Society / politicians

Finally, EWE validated and approved the collected results from the workshops with the Board of Management and Supervisory Board. GRI 102–46

The key non-financial issues identified in our 2017 materiality analysis are presented in the following materiality matrix. The X-axis shows the relevance of the issues to the business of EWE; the Y-axis shows the effects of the business activities of EWE on the non-financial aspects.

Only the highly relevant issues in the top right sec-tion of the matrix have been identified as key in the sense of the CSR-RUG. These issues are part of our non-financial statement.

Therefore, EWE covers the legally required environ-mental, employee and social aspects as well as corruption prevention in its reports. The aspect of observing human rights was taken into account in the materiality analysis and not identified as a key reporting aspect in the sense of the CSR-RUG.

Other reporting aspects in accordance with the GRI

Biodiversity, internal resource consumption, supply chain and data protection are also key in accordance with the GRI and are voluntarily reported on beyond the specifications of the CSR-RUG. Our key issues are presented in the following sections: Responsible management, Environment, Plants and networks, Employees, Social aspects and relationships and Finance. The following table shows the allocation of the key issues. GRI 102–46

NFS


Key issues Section

Corruption prevention

Supply chain Responsible management

Environmental protection

Internal resource consumption

Biodiversity Environment

Security of supply and network stability Plants and networks

Working conditions

Education and advanced training

Health management and occupational safety Employees

Customer satisfaction and service quality

Information security

Data protection Social aspects and relationships

Economic responsibility Finance

NFS

NFS

NFS

NFS

NFS

NFS

NFS

NFS

NFS

5

4

3

2

1

53 421


Data protection

Biodiversity

Supply chain


Health management and occu pa-tional safety

Working conditions

Impa

ct o

n no

n-fin

anci

al a

spec

ts

Business relevance

Our material topics

Part of the non-financial statement

Customer satisfaction and service qualityEnvironmental protection

Economic responsibility



Security of supply and network stability

GRI 102–44 GRI 102–46 GRI 102–47


Responsible management

opportunities and risks. Therefore, in 2016, the EWE Group strategically reoriented itself with the change and increased its ability to adapt to the changing market situation through partnerships and collaborations.

Likewise, the restructuring project ‘Holding 2.0’ redefined the Group’s concept of management in 2016. Following the project, the management of the EWE Group is focused on both financial and non-financial aspects. A target agreement system with monetary, non-monetary, strategic and oper-ational targets was implemented for executive employees.

The organisational responsibilities as part of man-agement and controlling are defined and document-ed in Group guidelines, including in the Group fi-nance and risk management, Group controlling and Group development guidelines. Additionally, so as to minimise negative effects on the company, envi-ronment and society, the following guidelines have been implemented: information security; health, safety and environment; crisis and emergency man-agement and data protection.

EWE AG was designed to be a management holding company. Its duty is to preserve and increase the value of the Group. Therefore, the Board of Manage-ment controls the Group and its segments.

The strategic orientation of the management levels is often examined in management meetings, with consideration for internal analyses and considera-tions of the landscape in which the EWE Group is operating.

Additionally, at irregular intervals we factor the in-terests of our stakeholders into a materiality anal-ysis from which we derive the key non-financial is-sues for the EWE Group.

In order to control financial and non-financial con-cerns, measurable targets are agreed on the basis of statistics or progress criteria and frequently ex-amined in management meetings.

In the energy sector, established business models are losing more and more profitability due to recent technological developments, changing customer behaviour and adjustments to the competitive landscape. New business models give rise to both

R

NFS For more de-tailed information on the business model, see ➞■Combined management report / Business conditions and general frame-work / The EWE Group


Our code of conduct

Integrity and transparent business processes are key prerequisites for responsible management. In 2012, EWE set out guidelines for these in a code of conduct centred on the principles of sustainability, fairness and safety which sets out rules for avoiding conflicts of interest, dealing with business partners, gifts and sensitive company information.

Risk management

EWE has established an integrated risk manage-ment system across the Group in order to quickly identify and actively manage potential risks in con-nection with its business activities. The system makes it possible to identify and analyse key risks. Additionally, the internal control system for con-trolling and limiting key risks is documented and its effectiveness is tested annually. The Board of Management of EWE AG receives monthly reports on the results of the system; the supervisory com-mittees receive quarterly reports.

Corporate responsibility

Our business is carried out in a regulatory environ-ment. This environment affects the course of busi-ness. Additionally, we operate in markets with in-tense competition. We meet these corporate challenges with strategic measures. For example, we invest in our grid infrastructure and are capable of meeting the requirements of our strong customer base. Our central risk management system enables us to systematically track the key risks of our fields of business and Group activities, evaluate them and define control measures to avoid or minimise them.

NFS Crisis management

We have established a crisis and business continu-ity management system to protect and maintain our most vital business processes and the infra-structure required for them to function. We use this system to continuously analyse potential threat scenarios such as natural disasters, IT disruptions or attacks on our infrastructure, determine their effects and then derive specific measures and plans that can be put into place in such cases in order to keep our operations running.

Key risks as part of non-financial reporting

In line with the legislation that has been in effect since 1 January 2017, we consider the risks that have significant negative effects on the aspects identi-fied in our non-financial reports in addition to the key risks to our business activities.

Therefore, we have identified and assessed key risks relating to the individual concerns of the heads of our departments. The Group-wide risk management department has examined the risk assessments car-ried out for each individual concern with regard to risks that could very likely have serious negative effects on the concern. Finally, the risk inventory documented in the integrated risk management was examined.

These examinations have not identified any risks that could be considered highly likely to have a serious negative effect on the concerns as at the reporting date.


We are aware that we are very much in the public eye and that integrity is a key prerequisite for the success of our company. Strict adherence to the laws and regulations is a key prerequisite to avoiding potentially significant legal and economic risks for EWE and its stakeholders.

NFS

NFS


Concept

EWE does not tolerate corruption or bribery. This means that at EWE, it is forbidden to offer, promise or accept incentives, preferences, favours or other advantages intended to influence a business deci-sion or give that impression. We have codified this in an internal code of conduct as well as in our code of conduct for suppliers that our business partners must follow.

EWE has established a compliance management system (CMS) in which central duties are fulfilled by the compliance officer. The compliance officer is assisted by a compliance committee chaired by a number of different roles. Additionally, on the level of individual companies, compliance officers are appointed to manage the implementation of the compliance regulations in subsidiaries. They report to the management of each company and notify the compliance officer of related develop-ments. Quarterly reports are submitted to the Board of Management on the basis of these reports. Other compliance-related duties are carried out by the Group auditing department, risk management department and certain special officers.

Selected measures in 2017

In its meeting on 8 September 2017, the Super visory Board of EWE AG discussed and agreed a final eval-uation of the results of the final reports of the audit firm KPMG which investigated possible misconduct at EWE in spring and summer 2017.

In 2016, we started subjecting the compliance or-ganisation to an external audit and identifying room for improvement. We have been implementing im-provement measures since early 2017. These include the introduction of independent compliance and data protection roles at EWE AG. Human resources have been expanded here and in the decentralised EWE companies. Besides additional training cours-es, we also provided a mandatory e-learning course on corruption prevention in the majority of the companies.

1 EWE AG, EWE NETZ GmbH, EWE TEL GmbH, EWE VERTRIEB GmbH, EWE DIREKT GMBH, EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE TRADING GmbH, EWE OSS GmbH

For more details, see■➞ Combined management report / Report on risks and opportunities / Legal and compliance risks


In 2017, more than 3,700 employees 1 in the EWE Group were trained on corruption pre-vention with a mandatory e-learning course (EWE AG: 418 employees). EWE will strive to reach a larger number of employees over the next few years, including by means of a stand-ard Group-wide learning management system.

3,700employees in the EWE Group were trained on corruption prevention

418employees at the EWE AG were trained on corruption prevention

Results

Environmental protection

Concept

The EWE Group has established environmental management systems pursuant to EMAS and ISO 14001 for the majority of its power plants and com-panies. In this context, power plants are also as-sessed in terms of their environmental risks during failure-free and disrupted operation and, if neces-sary, risk minimisation measures are implemented. We also have a crisis and emergency management system which describes the steps to take in the event of an emergency such as major disruption in a power plant. EWE is expanding its onshore wind activities and is pursuing selected investments in offshore wind. We are withdrawing from marketing conventional generation, although we remain com-mitted to conventional customer power plants and heat generation.

From 2018 onwards, the environmental protection officer of the EWE Group will prepare annual re-ports for the Board of Management. These reports will contain CO2 statistics as well as the results of the verification of compliance with environmental legislation.

NFS

1 Taken into consideration are conventional combined heat and power stations, power stations, waste incineration plants, wind farms, biogas plants and hydroelectric power stations of the EWE Group, including proportional capacities of holdings consolidated using the equity method, although not including emissions of block 4, which is operated by a third party using furnace gas. Unlike in previous years, a small number of estimates were factored into the CO2-emission data

EWE strives to link economic success with responsibility for protecting nature and the environment. Therefore, we have introduced Group guidelines on environmental management and anchored the protection of nature and the environment in our code of conduct. This applies to our power plants, our conduct and our products.

EEnvironment

By 2020, the Group aims to lower the specific CO2-emissions from our electricity generation 1 by 40 per cent compared to 2005, expand renewable energy and withdraw from conventional generation.


■■ We have expanded our development capacity by acquiring two wind development companies, TURBOWIND Energie GmbH and the Gewi regen-erative Energien Group.

■■ EWE’s subsidiary swb CREA has opened wind farms with a capacity of 15.5 megawatts (MW).

■■ EWE ERNEUERBARE ENERGIEN increased its re-newable energy generation capacity by acquiring four wind farms with a total output of 38 MW.

■■ The highly efficient natural gas power plant Ge-meinschaftskraftwerk Bremen (GKB) in which EWE holds an interest through its subsidiary swb closed its first year of operation with an output of 1.9 million megawatt hours of electricity.


1 Taken into consideration are conventional combined heat and power stations, power stations, waste incineration plants, wind farms, biogas plants and hydroelectric power stations of the EWE Group, including proportional capacities of holdings consolidated using the equity method, although not including emissions of block 4, which is operated by a third party using furnace gas. Unlike in previous years, a small number of estimates were factored into the CO2-emission data

2 Internal generation capacity, capacities of holdings consolidated using the equity method and block 4, which is operated by a third party using furnace gas, have been taken into consideration. In this diagram, waste to energy is fully allocated to conventional generation even if, according to the EEG, around half of the energy generated from waste is considered renewable. Only the values for the 2017 reporting year have been checked

The specific CO2-emissions from electricity gen-eration have fallen from 563 grams per kilowatt- hour (g / kWh) in 2016 to 504 g / kWh 1 in 2017. Compared to the initial value in 2005, the spe-cific CO2 figure has therefore decreased by 39 per cent. Therefore, the target of a 40 per cent re-duction set in 2014 has almost been achieved already. One reason for this development is the high electricity generation of GKB. Besides the

good wind year in 2017, other reasons include the fact that the RIFFGAT offshore wind farm was operational all year for the first time and that onshore wind power has been expanded.

39%Reduction of the specific CO2 emissions compared to 2005

Results

0

100

200

300

400

500

erneuerbar konventionellJahr 2016Jahr 2017

0

300

600

900

1200

1500

Jahr 2016Jahr 2017

Offshore wind

Other*

2017

425

2016

374

Onshore wind

* Biogas, solar power, hydroelectric

274220

9

12142

142

500

400

300

200

100

0

Internal generation capacity 2

as at 31.12. in megawatts

Renewable

NFS

1,500

1,200

900

600

300

00

100

200

300

400

500

erneuerbar konventionellJahr 2016Jahr 2017

0

300

600

900

1200

1500

Jahr 2016Jahr 2017 2017

947

Conventional

2016

1,221

Natural gas

Light oilWaste to energy

Furnace/converter gas

Coal

156

307

200

200

422553

83

75

86

86

NFS

400

500

600

700

800

900

200720062005 2008 2009 2010 2011 2012 2013 2014 2015 2016

400

500

700

600

800

900

Specific CO2-emissions from electricity generation 1

Grams CO₂ per kilowatt-hour

828 815790 784 786

728 728

658

722

540

536563

504

NFS

2017



Concept

The responsible use of resources also involves inter-nal energy consumption resulting from, for example, our properties or fleet of vehicles. Therefore, EWE has introduced certified energy management sys-tems in companies with high levels of energy con-sumption. As we consume less energy than we generate ourselves, internal resource consumption is not part of the non-financial statement.

The energy policy of each company forms the frame-work for its energy targets. The objective is to op-timise energy consumption and increase energy ef-ficiency. We take this objective into account when planning, building and renovating buildings and pow-er plants and when we procure products, systems and services. For example, by the end of 2019 we aim to lower the consumption of heat and electricity per square metre of usable floor area in our adminis-trative buildings and communal utility services by 7.5 per cent compared to 2014.

In accordance with ISO 50001, the Board of Man-agement and the management of the companies carry out annual inspections of the energy manage-ment system in order to ensure that it remains suit-able, appropriate and effective. These inspections encompass energy policy, energy target achieve-ment and the implementation of efficiency meas-ures from the energy programme. They also assess compliance with statutory regulations and the ef-fects of new legal provisions on the organisation.


■■ By optimising the cooling of a second large data processing centre of EWE TEL and making other improvements to efficiency, the annual electric-ity consumption level has been lowered by around 400,000 kWh.

■■ The lighting in EWE’s main warehouse has been switched to LED technology. This is expected to save over 100,000 kWh of electricity per year.

Biodiversity

Their positive impact on our carbon footprint not-withstanding, wind farms also represent encroach-ment into our environment. Therefore, EWE makes sure that its expansion of wind energy is compati-ble with consideration for the necessary environ-mental specifications. It is important to EWE to cre-ate alternative habitats for plants and animals when it builds power plants. For example, when building the Bakum wind farm, EWE created alternative habi tats in the vicinity. Arable land and farmland were converted and depressions and a body of water were created.

In 2017, eleven EWE Group companies with par-ticularly high consumption levels introduced an energy management system.

The electricity consumption of the adminis-trative buildings, communal utility services and shops was lowered from 129 kWh per square metre in 2014 to 117 kWh per square metre in 2017. This represents a decrease of 9.3 per cent compared to 2014. We were there-fore able to meet the target originally set for 2019 in 2017.

9.3%Reduction of the electricity consumption compared to 2014

Results


Due to the energy revolution and especially the expansion of renewable energy, network operators are being forced to integrate many decentralised power plants into the network, some of which are dependent on the weather. Digitisation has given us the means of creating an intelligent energy system. In this regard, network operators are legally obliged “to, where economically reasonable, operate, maintain, optimise as necessary, strengthen and expand a secure, reliable and high-capacity energy supply network without discrimination” 1. Specifically, therefore, we are obliged to maintain network stability and security of supply.

PPlants and networks

Network stability and security of supply

Concept

There are two electricity distribution network op-erators in the EWE Group: EWE NETZ operates elec-tricity and gas networks in north-western Lower Saxony and gas networks in areas of Brandenburg and Mecklenburg-Vorpommern; wesernetz is the network operator in Bremen. Both are facing differ-ent challenges. Whereas EWE NETZ largely operates inland and has to integrate a large number of renew-able energy power plants there, wesernetz has to meet the new requirements of an urban area such as the growing significance of e-mobility in the transport sector.

For our customers, the reliability of the supply and in turn the stability of the network in Germany and Europe are what count. Therefore, we gauge the unavailability of the electricity supply, i.e. the av-erage duration of all supply disruptions experienced by an end consumer connected to the network of a network operator in one year.

NFS

In order to ensure the necessary network stability and security of supply, the technical conditions such as voltage, current, short circuit current and relia-bility of supply are regularly tested. Besides the eco-nomic aspects, adherence to such thresholds is a key planning criterion for our measures.

Additionally, the ageing behaviour of the equipment is monitored in order to control network stability and security of supply. Damage is assessed system-atically with damage codes so as to identify any in-crease in disruption frequency early on.

The reliability of the supply is tested annually and reported to the German Federal Network Agency and the Network Technology / Network Operation Forum (FNN) by 30 April each year.

1 German government. Energy Industry Act (EnWG), Federal Law Gazette, 2005


Measures

■■ For the first time, in line with ISO 55000, the 2017 budget plans were based on asset simula-tions that can simulate the ageing of the network over a number of years. From these results, we derive investment measures through which we can control the condition of our assets and ensure reliable network operation.

■■ EWE NETZ was one of the first network opera-tors in Germany to apply a peak cap at a substa-tion in Manslagt. This makes it possible to con-nect around 50 per cent more renewable energy to the network with no expensive cable network expansion measures.

■■ EWE’s demonstration project ‘enera’ creates an intelligent energy system based on renewable energy in a model region (see ‘Our Strategy’). As part of ‘enera’, a flexibility market is being de-veloped in order to improve the coordination of flexibility and support network stability. This is expected not only to lead to better conditions

in EWE’s own network, but also contribute to the stability of the networks of upstream network operators.

■■ In the ‘Green Access’ project, EWE is working with partners in industry and the business world to test current medium and low-voltage network automation solutions with a view to creating a stable, reliable distribution network.

1 The network lengths here deviate from the management report. They are based on the Group as a whole, whereas disclosures are by segment in the management report2 As the unavailability figure is first calculated for the purposes of the non-financial statement and then reported to the German Federal Network Agency

by 30 April, we have calculated a forecast based on the average values from 2013 to 2016 for the current 2017 report3 Source: German Federal Network Agency

Network lengths in km 1

2017 2016Change

%

Power 93,800 93,300 0.5

Gas 73,100 72,000 1.5

Telecommunications 40,300 39,100 3.2

of which copper cable 15,300 15,200 0.2

of which fibre optic 25,100 23,900 5.1

In 2017, the unavailability in the grids of EWE NETZ, wesernetz Bremen and wesernetz Bremerhaven was 5.8 minutes per customer on average (2016: 5.5 minutes) 2. The average in Germany was 12.8 minutes in 2016 3.

5.8 minutesUnavailability in the grids per customer

Results

For more details about enera see chapter ➞ Our strategy

For more details, see■➞ Combined management report / Report on risks and opportunities / Legal and compliance risks

Network lengths

As links between decentralised energy generation and consumption, our energy networks are a cru-cial factor in an efficient, reliable energy supply.

Our telecommunications network, which we are continuously expanding, serves as the basis for our full range of telecommunications services.


Working conditions

Concept

We strive to remain an attractive employer in an environment characterised by profound change pro-cesses. To this end, we want to enable our personnel to balance their professional and private lives. As an employer, we offer collective wage and bargaining agreements, a company pension scheme and in-house health management. We analyse our natural fluctuation in this context 1.

Group-wide conceptual frameworks such as its per-sonnel strategy and collective bargaining policy form the framework in which its operating com-panies act. As the architect of the framework, the Group’s personnel department monitors compliance with these regulations and supports the Group com-panies as a designer, advisor or service provider.

NFS Selected measures in 2017

■■ The social partners entered into the bargaining agreement ‘Mobile Working’ in order to increase flexibility in the selection of working hours and location.

■■ EWE OSS GmbH became the first company to establish a comprehensive collective wage agree-ment in the field of offshore services. Addition-ally, eight bargaining agreements have been signed between the social partners.

Energy, telecommunications and information technology provide a diverse field of work for an average of 9,134 employees in the EWE Group, 607 of whom work at EWE AG. Our success is the result of their skills and motivation. We rely on fair, appreciative collaboration and have set this standard down in the EWE code of conduct, with which EWE and all employees undertake to comply. Our activities are focused on three aspects:

EEmployees

1 Therefore, the departures from an EWE Group company due to employee termination, retirement or death are considered relative to the average number of full-time and part-time employees in that company. Managing directors, trainees, interns, apprentices, temporary staff and student trainees are not taken into consideration

2 EWE AG, EWE NETZ GmbH, EWE VERTRIEB GmbH, EWE GASSPEICHER GmbH, EWE ERNEUERBARE ENERGIEN GmbH and EWE TRADING GmbH


In 2017, the natural fluctuation1 in the EWE com-panies subject to the EWE framework collective wage agreement 2 was 2.1 per cent. For EWE AG, the natural fluctuation 1 was 1.9 per cent.

2.1%natural fluctuation in EWE companies

Results

1.9%natural fluctuation in EWE AG


Concept

The objective of education and advanced training is to strengthen the future competitiveness of EWE through the qualification of personnel and manag-ers. The training departments in the Group are re-sponsible for advanced training and ensuring that the Group has a sufficient supply of young personnel. The Group management, companies and managers are actively involved in controlling the education and advanced training activities. The process is con-trolled differently in the Group and from company to company. Requirements are identified in the decentralised operating companies. The personnel and organisational development of EWE AG sup-ports employees and managers with advice as well as strategic organisational and personnel develop-ment measures. EWE provides knowledge manage-ment and life-long learning programmes tailored specifically to certain target groups.


■■ The EWE Akademie has been supporting EWE managers with a new concept since 2017. The concept is centred on collaboration skills, cus-tomer orientation and agility, negotiation man-agement and business development. For certain topics, other employees have been given the opportunity to participate.

■■ In 2017, EWE employed 453 vocational trainees and students in 25 different professions and in-tegrated degree programmes throughout the Group. For the first time, EWE is also training retail sellers in line with its requirements.

NFS


The knowledge management and life-long learning programmes commit employees and managers to regular training courses, includ-ing in compliance, data protection and organ-isational decentralisation. We also provide our personnel with advanced training opportuni-ties tailored to each specific target group. EWE is increasingly reliant on digital learning con-cepts. In 2017, it created a series of e-learning units and made them available through the learning platform. At the same time, all per-sonnel have access to a range of training cours-es through the workshop portal. We train young professionals in a variety of professions in the Group’s internal centre for education and advanced training. The Group-wide services of the EWE Akademie are tailored to managers and talented individuals in particular.

Results

Health management and occupational safety

Concept

The Group’s occupational health and safety depart-ment controls the occupational health and safety processes and programmes and verifies their imple-mentation. The central health management depart-ment is responsible for occupational integration management, workplace health promotion and a health portal. The initiatives are adjusted on the basis of weekly and monthly absence reports. Addition-ally, EWE prepares annual health reports in order to identify new fields of action. The Board of Manage-ment receives regular reports on the health rate.

Within each company, workplace physicians, health and safety specialists and officers and the works council serve to support safety in the workplace. If an accident happens, it is analysed by the com-panies, discussed by an occupational safety com-mittee which convenes regularly and, if necessary, steps are taken to prevent future instances. The Board of Management is notified of the accident rate on a quarterly basis, or immediately in the case of particularly serious accidents.

We gauge our progress by the health 1 and accident rates 2. The health rate is to be kept above the average 3 for the sector and improved further. The Group strives for an accident rate below the average of 2014−2016 of the trade association Berufsgenos-senschaft Energie Textil Elektro Medienerzeugnisse (BG ETEM); in particular, fatal accidents should be prevented.

NFS

1 Defined as the proportion of regular working hours in which our personnel were present in one year2 Based on accidents that must be reported as defined by BG ETEM3 Source: Dachverband BKK e. V.4 With regard to the companies: EWE AG (excluding executive employees), EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE NETZ GmbH,

EWE TEL GmbH, EWE TRADING GmbH, EWE VERTRIEB GmbH, EWE WASSER GmbH, EWE Offshore Service & Solutions GmbH, BTC Business Technology Consulting AG, BTC IT Services GmbH, swb Erzeugung GmbH & Co. KG, swb Entsorgung GmbH & Co. KG, swb CREA GmbH, wesernetz Bremerhaven GmbH, wesernetz Bremen GmbH, swb Vertrieb Bremen GmbH, swb Vertrieb Bremerhaven GmbH & Co. KG, swb Services GmbH & Co. KG, swb AG, swb Abrechnungsservice GmbH

5 excluding executive employees6 Deviations from GRI 403-2: The figures concern employees, i.e. permanent employees and not subcontractors or temporary personnel; no classification by gender;

Accidents: besides occupational accidents, commuting accidents and company-facilitated sporting accidents are taken into consideration; Region: based on the companies indicated. There were no fatal accidents

7 With regard to the companies: BIBER GmbH, EWE ERNEUERBARE ENERGIEN GmbH, EWE AG, EnergieCampus GmbH, EWE GASSPEICHER GmbH, EWE NETZ GmbH, EWE TEL GmbH, EWE TRADING GmbH, EWE VERTRIEB GmbH, EWE WASSER GmbH, Gebäudesicherheit Nord GmbH, EWE Offshore Service & Solutions GmbH, Gastransport Nord GmbH, BTC AG, BTC IT Services GmbH, swb AG, swb Beleuchtung GmbH, swb Entsorgung GmbH & Co. KG, swb Erzeugung AG & Co. KG, swb CREA GmbH, swb Vertrieb Bremen GmbH, swb Vertrieb Bremerhaven GmbH & Co. KG, swb Services AG & Co. KG, swb Abrechnungsservice GmbH in Bremen, wesernetz Bremen GmbH, wesernetz Bremerhaven GmbH, qbig GmbH. Only the values for the 2017 reporting year have been checked


■■ Health measures such as the ‘Time for Me’ initi-ative, raising awareness of exercise, stress and addiction, especially among apprentices, diverse exercise and nutrition programmes, work in an open-plan office and the development of a healthy management concept.

■■ Personnel are regularly briefed about potential dangers in the workplace and how to handle them safely; additionally, short safety talks are provided, especially in technical fields, following recent events.


In 2017, the health rate was 94.6 per cent 4

(industry average for 2016: 95.2 per cent 3). The health rate for EWE AG 5 was 96.0 per cent in 2017.

94.6%health rate 2017 in the EWE Group

In 2017, the accident rate6 declined from 10.7 to 8.1 accidents per 1,000 employees 7. The acci-dent rate in EWE AG was 3.0 accidents per 1,000 employees in 2017. As a result, the current aver-age of 18.2 accidents per 1,000 employees for 2014–2016 of BG ETEM has been surpassed.

8.1accidents per 1,000 employees EWE Group

There were no fatal accidents. 7

3.0accidents per 1,000 employees EWE AG

96%health rate 2017 for EWE AG

Results

Concept

EWE’s approach to innovation is based on corporate entrepreneurship and as such, aims to anchor dy-namism and entrepreneurial spirit firmly within the company. We have therefore established a central innovation department in the Group that will work with other departments. This will make it possible to demonstrate and test innovative approaches and ideas quickly and without delay.

Besides the traditional value chain in the energy sector, EWE aims to create a digital value chain. For example, this involves collecting data, establishing a range of communication technologies, developing an open, centralised data platform (known as an energy transition ecosystem), refining and evaluat-ing data through analyses and data science and developing diverse new data-based business mod-els for commercial and private customers.

The stated strategic objective of EWE is to signifi-cantly increase the share of its net income that is attributable to digital business models over the next few years. A digital world also requires the creation of a network of closely collaborating part-ners that will be expanded on a national and inter-national level over the next few years.


■■ In the ‘enera’ project, EWE aims to create a func-tional energy system based on renewable energy

in a model region. It should be possible to transfer the findings to Germany as a whole (see the box).

■■ The EWE Business Hub, a unit of the Business In-novation department, develops early-stage inno-vations and prepares them for implementation. Additionally, the central Business Hub controls and develops collaboration with start-ups.

■■ It also applies other internal and external ap-proaches to innovation that EWE identifies, sup-ports and subsidises through systematic ideation and acceleration processes to develop new, future- proof business models.

One of the central issues in the German energy sector at the moment is how to respond to digitisation. Which companies will master the transformation process from analogue to digital and what concepts will they pursue? At EWE, it is a question of how rapidly and sustainably can we successfully integrate digital inno-vations into our current business model.

KKnow-how

The smart meter roll-out in the ‘enera’ project did not go according to plan in 2017 due to the lack of availability of certified meters, although it will gain momentum in 2018 and create another key platform for the project.

In the business year ended, the execution and implementation of innovation work as part of diverse ideation and acceleration formats re-sulted in the identification of a number of busi-ness ideas from which some were selected and are now being systematically developed fur-ther. The development phase of these ideas and business models ranges from the rough idea to simple idea status to the spun-off com-pany, including in the fields of e-mobility and battery storage.

Results

More to enera see chapter ➞ Our strategy


Customer satisfaction and service quality

Concept

The customer satisfaction quality index1 which we derive from a customer survey provides us with im-portant indicators regarding customer satisfaction and service quality.

Our benchmarks are the average values of our com-petitors in the energy and telecommunications sup-ply area that we aim to surpass. Additionally, we have our customer service analysed and rated by the independent agency ServiceRating. ServiceRat-ing rates service management, services and service effectiveness.

On this basis, we develop measures designed to re-tain existing customers and attract new customers. The Board of Management is notified of the results regularly. Additionally, the telecommunications company EWE TEL provides profit-sharing based on the degree of progress towards targets.

NFS


■■ EWE is driving the expansion of its fibre optic network.

■■ EWE provides its customers with an app which, for example, enables them to submit digital meter readings.

EWE sees itself as an interface in a world of decentralised energy generation in which more and more energy customers are becoming energy producers. Our business is focused on the satisfaction and trust of our customers and partners. In a digital world, information security and data protection are growing in significance in the eyes of our customers.

SSocial aspects and relationships

1 In terms of energy, the customer satisfaction quality index only covers the EWE brand, whereas in terms of telecommunications it covers EWE, swb and osnatel. Produkt + Markt GmbH und Co. KG carried out the study, including the survey, supplied the customer satisfaction quality index and collects the benchmarks


In 2017, over 4,000 households were connect-ed to the fibre optic network.

Our customer service was rated ‘very good’ by ServiceRating.

The customer satisfaction quality index was 2.23 in 2017. Overall, we are therefore on track to meeting the benchmarks in many areas.

More than

4,000households were connected to the fibre optic network

2.23customer satisfaction quality index in 2017

Results


Concept

Within the Group, we have established information security systems based on DIN ISO 27001 in order to guarantee our customers a reliable supply of energy, telecommunications and water. The Group guidelines on information security set out the frame-work for action and define the responsibilities of managers and employees.

EWE’s information security policy is aimed at pre-venting damage to the Group and its stakeholders. For us, this means ensuring the availability, integrity and confidentiality of information and preventing data leaks. Additionally, we strive to comply with the statutory and internal regulations in order to mini-mise liability risks.

In addition to implementing suitable security solu-tions, we train our employees and raise awareness in order to achieve our targets. EWE gauges its pro-gress by the information security training rate 2, 3.

The Board of Management of EWE AG bears overall responsibility for information security. The Chief Information Security Officer (CISO) of EWE AG rep-resents the information security interests of the Group. Through regular reporting, the CISO makes sure that the managing directors and boards of man-agement of the EWE companies and even the Board of Management of EWE are suitably involved. The decentralised business units are responsible for implementing information security. The managers are responsible for maintaining the security of in-formation and data and adhering to regulations with-in their fields of responsibility. The companies are assisted by their information security officers in their efforts to fulfil the necessary duties. The IT units also contain IT security officers who are responsible for the suitable implementation of business require-ments into the relevant IT systems.


■■ The information security e-learning module devel-oped in 2016 has been introduced by EWE AG and other companies 4.

NFS

■■ Technical measures have been implemented to identify and defend against attacks on the IT infrastructure.

Data protection

EWE undertakes to treat information and data of customers and business partners with care and as confidential, and to adhere to the data protection regulations. Therefore, the data protection regula-tions in the code of conduct apply during the term of the employment and business relationship and remain in effect afterwards. We have appointed data protection officers for EWE AG and the individual companies.

A data protection e-learning module was intro-duced in multiple Group companies in 2017. In 2017, the rate of participation in the data protection e-learning module was 44.5 per cent in the relevant Group companies 5.

Supply chain

EWE assumes responsibility for its business activities outside of its own sphere of influence, which is why it introduced a supplier code of conduct in 2015. It sets out principles relating to human rights and work-ing conditions, occupational health and safety, en-vironmental protection and the integrity of business.

In 2017, we spent around 1 billion euros on materi-als and services. Of this amount, around 50 per cent was attributable to regional suppliers 6.

2 With regard to approx. 4,700 personnel in EWE AG, EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE NETZ GmbH, EWE Offshore Service und Solutions GmbH, EWE TEL GmbH, EWE TRADING GmbH, EWE VERTRIEB GmbH and EWE WASSER GmbH

3 The figure is defined as the number of personnel who have been trained in information security through an e-learning unit during the year4 EWE AG, EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE NETZ GmbH, EWE Offshore Service und Solutions GmbH, EWE TRADING

GmbH, EWE WASSER GmbH, EWE VERTRIEB GmbH; EWE TEL GmbH, BTC Business Technology Consulting AG und BTC IT Services GmbH are still using the previous e-learning module that they already had due to certification requirements

5 EWE AG, EWE NETZ GmbH, EWE VERTRIEB GmbH, EWE TEL GmbH, EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE TRADING GmbH, BTC Business Technology Consulting AG, BTC IT Services GmbH

6 The expenses of the EWE companies in Turkey and GTG GmbH have not been taken into account


In 2017, we achieved a Group-wide informa-tion security training rate of around 79 per cent 4. Likewise, the training rate at EWE AG is around 79 per cent.

79%training rate information security

Results

F The energy industry is in a state of upheaval. The focus will shift to decentralised, renewable energy, investments in grid infrastructure and new digital customer solutions. Our vision is to build the leading energy company in northern Germany by 2026. We aim to fulfil our economic responsibility towards all of our stakeholders through prospective investments and long-term profitability.

Economic responsibility

Concept

We will use our financial strength and financial management to finance and control our operation-al business and our growth. Our 2026 strategy forms the framework of our business activities. We monitor and control their economic success and therefore the financial capacity of the Group by systematically monitoring risks through financial indicators and processes (see ‘Internal Management System’ in the combined management report). Con-tinuous controlling and reporting enables us to im-plement suitable corrective measures in the event of deviations. Additionally, we follow our investment and project guidelines in order to ensure that our investments generate value.

By focusing on economic success and value growth, we are fulfilling our economic responsibility and making our contribution to society, e.g. through taxes, wages and salaries, without strategically con-trolling the distribution of the created value.

NFS


InvestmentsAs part of our growth strategy, we have increased our investments in our telecommunications net-works by 55.6 per cent over the previous year to 49.8 million euros. Overall, at 196.9 million euros, our investments in our infrastructure of electricity, gas and telecommunications networks are on a sim-ilar level to 2016. Driven by large-scale projects such as broadband expansion in north-western Ger-many, we will continue to increase our investments over the next three years.

Through the results we have achieved (see ‘Segment Performance’ in the management report) and in-vestments we have made, we have strengthened the basis for future value creation in our other segments too.

Finance

For more information see ➞ ‘Internal management system’ in the combined management report

For more information see ➞ ‘Segment performance’ in the combined manage-ment report


Value creation EWE Group


Directly generated economic value in 2017

Revenue (excluding electricity and energy taxes) 8,250.5 7,566.3

Breakdown of economic value

Material expenses −6,333.6 −5,761.7

Personnel expenses −711.9 −722.5

Interest expenses −158.7 −219.5

Income taxes −128.6 −119.5

Donations 2.8

Value creation EWE AG


Directly generated economic value in 2017

Revenue (excluding electricity and energy taxes) 155.6 148.2

Breakdown of economic value

Material expenses −79.6 −68.6


Interest expenses −82.3 −146.5

Dividends −88.0 −225.5


Donations 1 0.1

1 Of this amount, 36,341 euros is attributable to monetary donations, 36,070 euros to donations in kind and 72,000 euros to membership fees that were only recognised as donations for tax reasons

NFS

NFS


With a directly generated economic value in ex-cess of 8 billion euros in 2017, EWE bears a great responsibility towards numerous regional stake-holders. For example, we are a key employer in the Weser-Ems region. The personnel expenses reflect the employment of 9,134 personnel. Additionally, over 75 per cent of the generated value is used to procure materials and services. We are able to pay our shareholders an annual dividend (88.0 million euros in 2017) which amounted to 225.5 million euros in the previous year due to a special distribution.

Results

Business conditions and general framework

32 The EWE Group35 General economic conditions36 Political and regulatory environment

Current situation of the EWE Group

39 Overall assessment of business performance

39 Forecast deviations39 Results of operations40 Significant changes to the consolidated

income statement41 Segment performance43 Net assets45 Non-financial performance indicators

32 39

Combined management report

Report on expected developments and their key opportunities and risks

47 Forecast report48 Future political and regulatory conditions50 Expected performance of the EWE Group51 Report on risks and opportunities55 Key characteristics of the

EWE Group’s accounting-related internal control system

Current situation of EWE AG

56 Results of operations57 Net assets58 Financial position58 Investments59 Forward-looking statements

47 56

32 C O M B I N E D M A N AG E M E N T R E P O R T Business conditions and general framework

Business conditions and general framework

The EWE Group

Organisation and Reporting principles

We are an energy company which operates primarily in the fields of energy, telecommunications and information tech-nology (IT) in Germany, Turkey and Poland. Besides operating state-of-the-art, reliable energy grids, we are a pioneer in the field of renewable energy and, as the first company in Germany to do so, tap the joint potential of energy, telecommunications and IT. The EWE Group comprises EWE Aktiengesellschaft (also referred to as EWE AG), an ‘Aktiengesellschaft’ (public limited company) incorporated under German law, as well as its sub-sidiaries. Our company’s headquarters are located in Olden-burg, Germany. In the 2017 business year, the Group had an average of 9,134 employees (previous year: 9,048 employees).

Description of business activities

Renewables, Grids and Gas Storage segmentIn the Renewables segment, we plan, build and operate renew-able power generation plants, including within the scope of investment and partner models. We market our expertise in the construction and operation of offshore wind farms inter-nationally. In the current business year we have improved our power generation capacity (including proportional capacities of holdings consolidated using the equity method), from 296,8 megawatt to 332,0 megawatt.

In the Grids business area, we operate state-of-the-art, effi-cient power grids and natural gas networks in the We ser-Ems region of Germany, as well as natural gas networks in Branden-burg / Rügen and Nordvorpommern totalling 139.2 thousand km in length (previous year 138.5 thousand km). Thanks to low outage times, our distribution grids are some of the safest in Europe. We also operate a wide telecommunications net-work approximately 40.1 thousand km in length (previous year: around 38.8 thousand km). The company is continuously push-ing forward with the expansion of broadband in the rural areas of north-western Germany. We also operate several drinking water networks and, as an energy company with regional roots, are active in the waste water business. We purified 18.4 million cubic metres of water in the reporting year (previous year: 17.6 million cubic metres).

In the field of Gas Storage we construct, acquire and operate systems to store as well as inject and withdraw gaseous and liquid energy carriers such as high-pressure natural gas, hydro-gen, liquefied petroleum gas and compressed air, and render

all related services. In this business area we operate a total of 38 underground reservoirs in locations throughout northern Germany, as well as in Rüdersdorf near Berlin, and sell storage capacity to internal and external customers. With a total stor-age capacity of 2.1 billion cubic metres, we are one of the largest operators of gas storage reservoirs in the German-European natural gas market.

Sales, Services and Trading segmentThe Energy and Telecommunications business area combines the sale of energy products with telecommunications. In the domestic market, the sale of energy products takes up the leading position in the competitive environment. The focus of its telecommunications sales lies primarily in north-western Germany, parts of Brandenburg, on the island of Rügen and in the Ostwestfalen-Lippe region. We support commercial cus-tomers nationwide. Through the establishment of additional business activities such as light contracting, power storage and energy audits, we are currently transitioning into a service provider for which – in addition to the classic power, gas and heat products and telecommunications – customer-specific services and solutions will open up new business opportunities.

The IT area contains our holistic range of IT products and ser-vices designed especially for the energy and telecommunica-tions sectors, the public sector, industrial companies and service providers. Our key areas of expertise lie in consulting, system integration and applications and system management. We place a focus on energy-related software products.

The Trading business area encompasses services relating to the procurement and marketing of electricity and gas. Additional-ly, the Trading business area facilitates the optimisation of the entire energy portfolio of the EWE Group, allowing it to pro-vide its customers and partners with a wide range of services, for instance portfolio and balancing group management. By directly marketing renewable energy, the Trading business area helps operators of wind and solar parks throughout Germany market their electricity. Trading services to provide market ac-cess to our Group’s sales and generation activities.

International segmentIn Turkey and Poland, the distribution and sale of natural gas are key components of our business operations. Our business in Turkey holds long-term gas trade and liquefied natural gas licences as well as a power trading licence. We supply natural gas to industrial customers, industrial zones, gas power plants and utility companies throughout the country. Business cus-tomers are also supplied with electricity in both countries.

Business conditions and general framework C O M B I N E D M A N AG E M E N T R E P O R T 33

Through Millenicom, we have also been active in telecommu-nications in Turkey since 2016.

swb segmentThis segment encompasses our business activities in the cities of Bremen and Bremerhaven. swb and its subsidiaries are active in the fields of electricity, natural gas, heating, drinking water and telecommunications. Likewise, this segment includes the Conventional Generation and Disposal business unit of swb.

Group Central DivisionEWE AG manages the EWE Group as its holding company. Its duties lie in the strategic and cross-market development of the business areas as well as strategic planning and assuring the Group’s financing. In addition, EWE AG performs centralised corporate services for the Group’s companies.

Internal management system

The EWE Group uses a multilevel management system which makes it possible to decentralise corporate responsibility and at the same time create a high level of transparency. The in-ternal management system differentiates between the Group and the segment level. The operative segments Renewables, Grids and Gas Storage; Sales, Services and Trading; Inter-national and swb form the basis of the internal reporting struc-tures and external reporting (segment reporting). Internal and external reporting is based on the same management informa-tion system. This technological platform enables the use of a uniform database for a variety of reporting needs and ensures that the content of information is the same between reporting levels and within one reporting level.

As the parent company, EWE AG has defined targets for mea-suring and controlling company performance which will ensure the long-term success of the company. Integral components of this overarching objective include long-term value creation, assuring adequate financing and stabilising the company’s external rating.

Earnings before interest and taxes are of key importance, rep-resented by the leading key performance indicator operating EBIT. Operating EBIT represents earnings before interest and taxes, adjusted for special items. This includes valuation ef-fects from financial instruments, impairment, reversals of write-downs and special items resulting from changes to the basis of consolidation, as well as those resulting from restruc-turing measures and donations.

At the level of operative segments, the main key performance indicator operating EBIT is complemented by specific figures. Furthermore, investments and their distribution across the

individual segments represent a further focus of Group-wide reporting.

Internal and external Group reporting is continuously ad justed to meet the operative requirements of managing the EWE Group as well as current legal stipulations.

Research and development

In the 2017 business year, the company optimised its innovation- related activities and kept them in line with the requirements of the market. All business units and Group companies worked together to launch the holistic innovation process. An inte-grated organisational model was therefore developed to pool activities, allowing for greater professionalism through the specialisation of expertise and clear responsibility rules. Its objective is to systematically and efficiently create business model opportunities across company departments in a digital market and innovation landscape.

The enera project ‘Digital Agenda for the Energy Transition’ takes a systematic approach to demonstrate the thorough digitisation and increased technical flexibility of the energy system. The four-year project ends on 31 December 2020. In 2017, the first year of the project, the conceptual work from the pre-project phase was completed and transferred to the roll-out phase which will last until around the end of 2018. This phase will focus on the installation of technology. This includes the installation of smart measurement systems and modern grid technology (e.g. controllable mains transform-ers). Additionally, the construction of three battery storage systems in the model region was prepared. The enera market approach was developed and enera Smart Data and Service Platform were implemented and tested in collaboration with the European power spot trading stock exchange EPEX SPOT SE. Similarly, the first data-based business models were tested in a specially developed proprietary format and some put into further development.

The project ‘Regional Virtual Power Plant Field Test on the Basis of Micro-CHP Technology’ is a building block in the de-veloping field of virtual power plants which is being realised in collaboration with the university of technology TU Dresden. It is currently in the final year of its funding phase. The com-pletion of this year’s field test produced the following results in particular: Modern heating systems in private households with combined heat and power systems (micro-CHP systems) and electrical heating elements were successfully integrated into a virtual power plant and operated as regionally available flexibility. This could be done by fitting the micro-CHP sys-tems with smart metering and control technology and by building on the virtual power plants of EWE AG. The com-munications gateway developed especially for the project was


fitted with an interface based on a standardised energy effi-ciency protocol. The gateway is based on a low-cost micro- controller in order to ensure that it will be possible to use the gateway competitively and in line with the energy transition. A variety of utilisation and operation strategies were developed and then tested and evaluated from technical and econom-ic perspectives. The findings from the project will pave the way to integrating even small plants into modern energy grids.

In the green mega-battery project ‘brine4power’, the Friedrich Schiller University in Jena has determined in an initial research phase that stable electricity storage situations can be created even in brine saturated with salt. Therefore, the next investi-gations into the feasibility of electricity storage in underground storage facilities have been launched.

The ‘Green Access’ research project is examining how smart power grids must be to absorb as much green electricity as possible at low cost. The project is working with partners from industry and the world of science to determine how smart distribution grid automation can prevent restrictive bottle-necks. Power grid components and control concepts are being developed and linked in order to communicate and operate with one another. The medium and low-voltage network au-tomation solutions will be applied in a field test in order to derive practical approaches. The focus was on adherence to requirements in connection with network and system tech-nology as well as information and communication technology. Additionally, the self-learning automated distribution grid should be able to adapt to new situations. The project assesses the efficiency of the measures on the basis of reliability con-siderations and a performance measurement system.

Wholesale electricity (in EUR) Natural gas (in EUR) Coal (in USD) Crude oil (in USD) CO2 certificate (in EUR) Source: EEX, Intercontinental / 31.12.2017

Electricity, gas, CO2, coal and crude oil

50

40

30

20

10

0

— 100

— 80

— 60

— 40

20Q4 / 2014

Q1 / 2015

Q2 / 2015

Q3 / 2015

Q4 / 2015

Q1 / 2016

Q2 / 2016

Q3 / 2016

Q4 / 2016

Q1 / 2017

Q2 / 2017

Q3 / 2017

Q4 / 2017

in EUR in USD

Energy market and prices


General economic conditions

Development of the market

The business of EWE is more greatly affected by developments in the energy and telecommunications sectors than by global economic developments, which is why the information pro-vided below focuses on the energy and telecommunications markets.

Energy market and pricesInternational commodity prices, particularly of oil, gas and coal, as well as the prices of CO2 certificates, are the predom-inant factors that affect price trends on the power and gas markets. The petroleum market can be considered a leading indicator. The price of the front-month contract on the crude oil type Brent started at 55.47 US dollars per barrel in 2017 and essentially hovered around 55.00 US dollars per barrel in the first quarter. The price hit its lowest level in the year at 44.82 US dollars per barrel in June 2017. Afterwards, the con-tract started to experience upwards movement which con-tinued until the end of the year, closing at 66.87 US dollars per barrel. The front-month contract on electricity (base load) in Germany and Austria (Base Cal 18) started at 30.08 euros per MWh on the European Energy Exchange (EEX). It remained stable until the end of April. Additionally, the same contract was traded exclusively for Germany from 25 April 2017. It was introduced to the EEX as part of the preparations for a market area separation. The first settlement price on this day was 29.07 euros per MWh. The electricity market also started ex-periencing an upwards trend in the middle of the year, leading to a closing price of 37.67 euros per MWh. The German-Austrian contract closed the year at 37.72 euros per MWh. The same trends could be observed on the coal and emissions markets. Only the gas market experienced seasonal influences (high prices in winter months and low prices in summer).

In contrast, the spot prices in the electricity market were no-ticeable. These were influenced by low temperatures combined with a low renewable energy feed-in rate, especially at the start of the year. Additionally, the poor availability of its nuclear power stations caused France, normally an exporter of electricity, to become an importer of electricity. For exam-ple, the average price in January 2017 was 52.37 euros per MWh, the highest January price since 2009.

According to preliminary calculations by the Working Group on Energy Balances (Arbeitsgemeinschaft Energiebilanzen – AGEB), in 2017 energy consumption in Germany increased by 0.8 per cent compared to the previous year. Primary energy consumption in the reporting year totalled 461.5 million Tonnes of Coal Equivalent (TCE), compared to 457.9 million

TCE in the previous year. This growth is due primarily to the positive development of the economy. The AGEB expects CO2 emissions to have stagnated.

Natural gas consumption increased by 5.2 per cent to 109.2 million TCE. This is largely due to the increased use of natural gas in combined heat and power stations. However, the relatively colder weather led to increased use of natural gas for heating purposes. Comprising 23.7 per cent of total primary energy consumption, natural gas slightly increased its share compared to the previous year (22.7 per cent).

Renewable energy increased its contribution by 6.1 per cent to 60.5 million TCE. The feed-in of electricity generated by wind turbines increased significantly by 34.0 per cent year-over-year. Solar power (+5.0 per cent) and geothermal energy (+7.0 per cent) also experienced growth over the previous year. As a result, the proportion of renew ables in the overall energy mix increased slightly to 13.1 per cent (previous year: 12.5 per cent).

The increased feed-in of electricity from renewable sources and the increased generation of the natural gas CHP plants had a negative effect on coal consumption (which decreased by 10.4 per cent).

Due to plant overhauls, the contribution of nuclear power to the total energy consumption in 2017 fell by 10.3 per cent.

Telecommunications marketThe total revenue in the telecommunications services market in Germany was around 58.8 billion euros in 2017. It was there-fore 1.3 per cent lower than in the previous year (60.5 billion euros). Of this figure, around 26.2 billion euros were attribut-able to mobile communication services (previous year: 26.4 bil-lion euros) and around 32.6 billion euros were attributable to landlines including the cable network (previous year: 34.1 bil-lion euros). Therefore, the decrease is essentially attributable to landlines. The reasons remain the falling average revenue per user brought about by competitive pressure.

Unlike in previous years, Telekom Deutschland GmbH, Bonn (TDG), and the cable network operators were unable to in-crease their landline revenue further. It stabilised at around 19.1 billion euros (previous year: 19.1 billion euros) while alternative providers generated around 0.4 billion euros less in revenue. Adjusting the figure by the turnover of the cable network operators reveals that this is the first year since 2015 in which the revenue of TDG decreased slightly. The situation is different in the field of mobile communications: revenue has remained stable at 8.0 billion euros whereas competitors were forced to report decreases of around 0.5 billion euros.


Transition from low-calorific gas to high-calorific gasDue to the declining reserves of low-calorific gas in Germany and the Netherlands, a transition to high-calorific gas is essen-tial. This will also ensure supply security in the market regions that up until now have been supplied with low-calorific gas, of which the EWE service area is one. In light of recurring earth-quakes in the Groningen region, the Dutch government is currently drawing up a new statutory subsidy framework by autumn 2018. In this regard, we are monitoring the effects of the political situation on the market region transition and the security of supply in the EWE service area, and are holding constructive dialogues with political representatives and authorities in Germany and the Netherlands. The market region transition started successfully in the Bremen supply area this year, whereas the transition will not start until 2018 in EWE’s other network areas.

The German Grid Tariff Modernisation Act (NEMoG)The NEMoG came into effect in July 2017. The NEMoG affects the entire energy sector, especially the operators of taxable, decentralised power plants. If new plants are built after 2023, these will no longer have any avoided grid fees. They will con-tinue to be paid for existing power plants, although on a re-duced calculation basis. Compared to the previous regulations, this will lead to fewer avoided grid tariffs which directly affect the conventional generation of swb AG, Bremen (swb AG), in the EWE Group. Additionally, the Act provides for the gradual national unification of transmission grid fees from 2019 on-wards. This is expected to have a generally positive effect on the grid fees charged to consumers in north-western Germany and therefore in the domestic market of EWE.

The German Gas Network Access Ordinance (GasNZV)The amended GasNZV came into force in August 2017. In the EWE Group, the grid and marketing companies as well as EWE GASSPEICHER GmbH, Oldenburg, are most affected. The amended Ordinance provides for the combination of both German gas market areas on 1 April 2022. Additionally, it abol-ishes the first-come-first-served principle (a method for award-ing transport capacity) for gas storage units by 1 April 2018. Additionally, the amended GasNZV rules that long- distance network operators must offer all transport customers under-ground capacity, even at non-interconnection points; these regulations will come into effect on 1 January 2018. Other amendments affect the auctioning procedure for awarding ca-pacity, the determination of long-term capacity requirements and the margin of discretion of the Federal Network Agency.

A comparison of the origins of the revenue makes it clear for the entire market that the price competition between market players has led to increased pressure in the business customer segment. Over the long term, revenue has fallen by around 3.4 billion euros since 2012 to 21.4 billion euros in 2017. In contrast, revenue in the private customer segment is increas-ing, largely due to the growing demand for high bandwidths. In this segment, the market has grown by around 2.0 billion euros from 35.4 billion in 2012 to 37.4 billion euros in 2017.

Due to the fact that fewer and fewer companies are investing in expanding their telecommunications infrastructure, the level of investments in 2017 was around 0.1 billion euros below the level of TDG. Likewise, the total volume of the investments decreased by around 0.3 billion euros to 7.9 billion euros.

Political and regulatory environment

New framework for combined heat and powerThe new German Combined Heat and Power Act (KWKG) came into effect at the start of 2017. The amendments to the cur-rent law focus on the introduction of tendering for plants with installed capacities of between 1 and 50 MW as well as par-ticularly innovative CHP plants. For the EWE Group, the in-troduction of tendering will make the field of business for plants of this scale a more challenging environment. Additionally, the amendments increased the subsidy criteria for heating net-works in which a higher proportion of CHP heat or heat from renewable sources is required.

New regulations for renewable energy and self-supplyThe reformed German Renewable Energy Sources Act (EEG) came into force on 1 January 2017. It stipulates that the scale of subsidies for renewables will be determined by a competi-tive tendering process. The regulations concerning onshore wind energy are particularly relevant to EWE as we aim to ex-pand this method of generation even further. The 2017 version of the EEG defines a network expansion area in northern Germany in which only the expansion of cost-effective, easily controlled wind turbines on land is to be restricted. EWE is critical of the expansion limit for onshore wind energy.

Additionally, the Act Amending the Combined Heat and Pow-er Act and the Renewable Energy Sources Act (KWKG-EEG-Änderungsgesetz) will change the general framework for re-newable energy in such a way that own consumption will only remain unaffected by the EEG reallocation charge under cer-tain circumstances and for certain plants. This could render certain projects unattractive to EWE customers.


German Federal Network Agency lowers X GenerellIn order to determine the revenue ceiling for the third regula-tory period, the German Federal Network Agency has set the general industrial productivity factor X Generell for gas network operators at 0.49 per cent in a preliminary announcement. The factor was 1.50 per cent previously. EWE NETZ is still of the opinion shared by the sector that an X Generell of above 0 per cent for the third regulatory period cannot be derived or justi-fied to any great extent and will therefore voice this opinion in the ongoing consultation process. With regard to the third reg-ulatory period for electricity which starts on 1 January 2019, it is possible that the Federal Network Agency will set different general productivity specifications for electricity and gas.

Installation of intelligent meters and communication infrastructureThe objective of the statutory regulations in the EU Third Internal Energy Package and amended Energy Industry Act (EnWG) (2011) is to fit and control distribution networks with intelligent meters and communication infrastructure in the future. EWE NETZ is still going to great lengths to implement these specifications without jeopardising the security of sup-ply of the service area. Intelligent networks will help overcome these challenges. The use of information and communication technology creates integrated data and electricity networks with novel features. For example, intelligent control systems can balance out the fluctuations in electricity generation from renewable sources as well as electricity consumption. Smart grids guarantee secure, efficient and reliable system and net-work operation and help lower the need to expand networks. Intelligent measurement systems – smart meters – are one component of the intelligent networks. They help increase energy efficiency whilst saving electricity. Additionally, they support the novel features of the network.

In accordance with the German Metering Point Operation Act (MsbG), EWE NETZ registered its status as a fundamentally responsible metering point operator in its service area on 30 June 2017. In its role as a fundamentally responsible meter-ing point operator, the network company has to replace all conventional electricity meters with modern measurement systems and smart meters by 2032.

The German Electricity Network Access Ordinance (StromNZV)In December 2017, the Bundesrat approved the amendments to the StromNZV proposed by the German government. It can now come into effect. The amendment defines the national duties of transmission grid operators to preserve the unified German electricity bidding zone. They are legally obliged to facilitate trades in Germany without awarding capacity in such a way that the territory of the Federal Republic of Germany represents a unified electricity bidding zone. It is prohibited to unilaterally introduce capacity allocation that would lead to a unilateral division of the unified German electricity bid-ding zone. Such a division of the electricity bidding zone would likely lead to region-specific price increases or decreases and would probably have considerable effects on society in general. This would directly affect the companies of the EWE Group.

Equity interest rates for the third regulatory periodIn October 2016, the German Federal Network Agency pub-lished the equity interest rates for electricity and gas network operators for the third regulatory period. Despite in-depth discussion, the Federal Network Agency did not deviate from its massive planned decrease in equity interest rates following the consultation phase. EWE NETZ GmbH, Oldenburg (EWE NETZ), has joined other grid operators and filed an appeal against this decision with the Higher Regional Court (OLG) of Düsseldorf.


Expansion of VDSL vectoring in short-range networksEWE has received permission from the Federal Network Agency to expand around 300,000 connections and will augment them with vectoring technology by early 2019. Users will then have access to broadband speeds of up to 100 Mbit / s. The appeal against the decision of the Federal Network Agency has not been continued after the decision was not corrected in expedited proceedings.

Implementation of the German Digital Network Act (DigiNetz-Gesetz)The first official implementation measures and dispute reso-lution proceedings took place in 2017 in connection with the Digital Network Act that came into effect in late 2016. EWE is fulfilling the expanded duties to map its own infrastructure. In a controversial decision, the Federal Network Agency forced one company to allow shared use of its underground works with no significant compensation. Companies that are invest-ing in fibre optic expansion are therefore pressing for a change to the statutory regulations in this context.

New state government in Lower SaxonyFollowing the state parliamentary elections in Lower Saxony on 15 October 2017, the SPD and CDU quickly formed a grand coalition. The coalition agreement signed in mid November contains certain plans of relevance to EWE: the state remains committed to renewable energy and will work on a national level to raise the offshore expansion target from 15 to 20 GW by 2030. The state government also wishes to provide politi-cal support for the project ‘enera’. With regard to telecommu-nications, Lower Saxony has set itself the ambitious target of comprehensive 1 Gbit connection availability by 2025 and, as part of a ‘digitisation master plan’, wants to provide 1 billion euros for broadband expansion with fibre optic technology by 2022. In terms of transport, Lower Saxony hopes to become a pioneer in e-mobility amongst the German states. The new state government wants to continue working on the Climate Protection Act in Lower Saxony with an integrated energy and climate programme for Lower Saxony which started under the SPD and Greens in 2017.

The German Tenant Electricity Act (Mieterstromgesetz)The German act on the subsidisation of tenant electricity came into force on 25 July 2017 and subsidies were approved by the European Commission on 20 November 2017. Under the Ten-ant Electricity Act, landlords receive a subsidy if they pass electricity generated by solar panels mounted on the roof or adjacent building sections directly to their tenants. One re-quirement is that at least 40 per cent of the area in the build-ing be used for residential purposes. The subsidies are capped at 500 MW per year. For EWE, this can open up new options for shared business models with the housing sector.

The German Sewage Sludge Ordinance (Klärschlammverordnung)The amended Sewage Sludge Ordinance and therefore strict-er requirements concerning the ground-based utilisation of sewage sludge came into force on 3 October 2017. One key element of the amended ordinance is that, after the expiry of certain transition periods for larger wastewater treatment plants, phosphorous must be recovered from the sewage sludge or from sewage sludge incineration ash. This will be followed by the duty to prepare a report on sewage sludge disposal and phosphorous recovery in 2023 and mandatory phosphorous recovery with thermal treatment for waste water treatment plants with a population equivalent of over 100,000 in 2029, which will extend to wastewater treatment plants with a population equivalent of over 50,000 in 2032. There-fore, EWE is increasingly interested in thermal sewage sludge utilisation with mono-incineration systems as an alternative to agricultural disposal.

The German Fertiliser Regulation (DüMV) and Fertiliser Act (DüG)The amended DüG and the new DüMV further limit fertilizer use, including with new blocking periods and limits on pollut-ant inputs. This also concerns the use of sewage sludge in agriculture. From 2019 onwards, only polymers that are recoverable and meet certain composition requirements can be used. At the moment, the disposal of sewage sludge for EWE is still contractually secured, although in the long term, the new statutory fertilizer regulations are making mono- incineration systems an alternative to the agricultural disposal of sewage sludge.

Current situation of the EWE Group C O M B I N E D M A N AG E M E N T R E P O R T 39

Current situation of the EWE Group

Overall assessment of business performance

Overall, the Board of Management of EWE AG can look back on a positive 2017 business year, even if at 256,1 million euros, the net income for the period was lower than in the previous year. The main reason for this decrease was the successful dis-posal of the shares in VNG – Verbundnetz Gas Aktienge-sellschaft, Leipzig (VNG), in the previous year. The decrease was offset to a certain extent by the lower impairment and higher net interest which does not include a prepayment pen-alty this year. Operating EBIT is 503,4 million euros and is 31,2 million euros lower than in the previous year. This decrease is due primarily to income from the reversal of pension provi-sions in connection with the reorganisation of swb’s company pension scheme in the previous year.

At 503,4 million euros, the operating EBIT of the EWE Group for the 2017 business year was slightly above expectations. The Renewables, Grids and Gas Storage and International seg-ments in particular experienced positive deviations from their forecasts. The Sales, Services and Trading and swb segments remained consistent with their forecasts.

The developments in the Renewables, Grids and Gas Storage segment are due primarily to higher earnings contributions from the electricity and gas networks as well as less of a need for planned expenses. An allocation to the rehabilitation pro-visions for gas storage in particular had the opposite effect.

The International segment performed above expectations, due largely to the significant improvements in the earnings of Bursagaz which more than balanced out the negative effects of our trading activities resulting from expected but unreal-ised increases in gas prices.

T001

Forecast deviationsOperating EBIT in millions of euros 2016 2017 target 2017 Achievement

Renewables, Grids and Gas Storage segment 333.7 +0% to +10% 388.8 16.5%

Sales, Services and Trading segment 61.2 +10% to +35% 70.6 15.4%

International segment 25.6 −30% to −15% 24.8 −3.1%

swb segment 165.2 −60% to −45% 89.3 −45.9%

Group Central Division −51.1 −70.1 −37.2%

EWE Group 534.6 −20% to −10% 503.4 −5.8%

Results of operations

The ability of the EWE Group’s normal business operations to generate earnings over the long term is of particular impor-tance to both internal governance as well as the external com-munication of the current and future development of the Group’s earnings. Operating EBIT is an adjusted earnings figure which is used to illustrate and manage operative earnings per-formance. To calculate operating EBIT, EBIT is adjusted for special items such as financial instruments, impairment, rever-sals of write-downs and special items resulting from changes to the basis of consolidation, as well as those resulting from restructuring measures and donations.

The following chart illustrates the reconciliation to the con-solidated result for the period:

T002


Operating EBIT 503.4 534.6

Derivatives 25.2 87.7

Fair value measurement of other financial instruments 41.2

Reversals of write-downs 60.3

Impairments −132.9 −174.9

Investments 1.7 243.0

Restructuring 4.9 −21.2

Donations −20.0

EBIT 503.8 649.2

Net interest income / expense −142.5 −206.5


Consolidated result for the period 256.1 332.9

40 C O M B I N E D M A N AG E M E N T R E P O R T Current situation of the EWE Group

plant and equipment by EWE energia (51.0 million euros) and the reversal of write-downs of intangible assets by Kayserigaz (9.3 million euros).

Overall, due to lower impairments, depreciation, amortisa-tion and write-downs decreased from 605.8 million euros to 558.9 million euros.

The income from investments fell significantly by 210.9 mil-lion euros. This is because the value in the previous year con-tained the proceeds from the disposal of the shares in VNG totalling 240.3 million euros.

The net interest of −142.5 million euros resulted primarily from interest on bearer bonds (public-sector bonds), bonds (private placement), interest on floating bank debts and the com-pounding of non-current liabilities. The net interest is 64.0 mil-lion euros higher than in the previous year. This is due to the prepayment penalties of around 50 million euros incurred in the previous year in connection with the premature buy-back of bonds.

In the 2017 business year, our Group generated turnover (ex-cluding electricity and energy taxes) of 8,250.5 million euros (previous year: 7,566.3 million euros). This represents an in-crease of 684.2 million euros over the same period in the pre-vious year (9.0 per cent). Due to the almost fully proportion-al increase in material expenses (9.9 per cent), the material usage rate of 76.8 per cent was at the same level as in the pre-vious year (76.1 per cent). In the reporting year, approximately 92 per cent of the turnover was generated inland and approxi-mately 8 per cent was generated abroad.

Personnel expenses were at the same level as in the previous year.

The balance of other operating income and other operating expenses (including inventory changes and internally produced and capitalised assets) totalled −169.8 million euros (previous year: −81.6 million euros). The change compared to the same period in the previous year is largely due to the lower income from the reversal of provisions and from the lower positive measurement effects for derivative financial instruments and recognised underlying transactions with regard to energy. This was balanced out by the reversals of write-downs of property,

T003

Significant changes to the consolidated income statementin millions of euros 2017 2016 Change in %

Revenue (excluding electricity and energy taxes) 8,250.5 7,566.3 9.0

Material expenses −6,333.7 −5,761.7 −9.9

Personnel expenses −711.8 −722.5 1.5

Other income and expenses −169.8 −81.6 <−100

Impairment losses / income pursuant to IFRS 9.5.5 −16.1

Depreciation, amortisation and write-downs −558.9 −605.8 7.7

Income from investments 43.6 254.5 −82.9

EBIT 503.8 649.2 −22.4

Net interest income / expense −142.5 −206.5 31.0

Earnings before income taxes 361.3 442.7 −18.4

Income taxes −105.2 −109.8 4.2

Earnings in the period 256.1 332.9 −23.1

Thereof attributable to:

Shareholders of the parent company 254.9 331.9 −23.2

Minority shares 1.2 1.0 20.0

256.1 332.9 −23.1


Segment performance

The following chart illustrates the operating EBIT and exter-nal sales:

In our Renewables, Grids and Gas Storage segment, external revenue in the reporting period grew by 5.2 per cent year-over-year to 2,118.5 million euros (previous year: 2,012.9 million euros). The increase in turnover resulted primarily from high-er electricity and gas grid tariffs and from the increased elec-tricity generation capacity of the RIFFGAT offshore wind farm following its disconnection from the grid in the previous year. This segment contributed approximately 25.7 per cent to the Group’s total revenue in the reporting period (previous year: 26.6 per cent). Operating EBIT amounted to 388.8 million eu-ros (previous year: 333.7 million euros). This was due in par-ticular to positive effects on earnings by the Grids business area. The Renewables business area is profiting from the in-crease in the earnings of the RIFFGAT offshore wind farm. This is due primarily to a better wind year and a permanently

T004

External sales Operating EBIT

in millions of euros 2017 2016 Change in % 2017 2016 Change in %

Renewables, Grids and Gas Storage segment 2,118.5 2,012.9 5.2 388.8 333.7 16.5

Sales, Services and Trading segment 4,421.1 3,763.9 17.5 70.6 61.2 15.4

International segment 623.8 727.9 −14.3 24.8 25.6 −3.1

swb segment 1,085.1 1,058.7 2.5 89.3 165.2 −45.9

Group Central Division 2.0 2.9 −31.0 −70.1 −51.1 −37.2

Total 8,250.5 7,566.3 9.0 503.4 534.6 −5.8

T005

Renewables, Grids and Gas Storage segmentin millions of euros 2017 2016


Derivatives −0.2 0.2



Investments 1.1 −0.1

Restructuring −1.2 −14.0

Donations −7.0

EBIT 314.3 163.6

smaller depreciation, amortisation and write-down scale due to the valuation allowances that were carried out. The decrease in changes in the value of gas inventories as at the reporting date and an allocation to the gas storage facility rehabilitation provisions had a compensatory effect.

Due to the aforementioned operating EBIT effects and lower impairments, the EBIT of 314.3 million euros increased over the previous year (150.7 million euros). The impairments in 2017 are essentially attributable to the RIFFGAT offshore wind farm.

Compared to the same period in the previous year, the exter-nal turnover of our Sales, Services and Trading segment has increased by 17.5 per cent to around 4,421.1 million euros. This is largely due to increased sales quantities in conjunction with higher commodity prices. This segment contributed approxi-mately 53.6 per cent to the Group’s total revenue in the

T006

Sales, Services and Trading segmentin millions of euros 2017 2016



Fair value measurement of other financial instruments −0.3



Donations −13.0

EBIT 85.7 103.4


At 1,085.1 million euros in the reporting period (previous year: 1,058.7 million euros), the external turnover of our swb seg-ment has increased by 2.5 per cent over the previous year. This segment contributed approximately 13.2 per cent to the Group’s total revenue in the reporting period (previous year: 14.0 per cent). Operating EBIT amounted to 89.3 million euros (previous year: 165.2 million euros). The decrease compared to the previous year is due primarily to the positive one-off special item of 90,6 million euros resulting from the reorganisation of the company pension scheme in the previous year.

The impairments of non-operative items mainly comprise write-downs of the conventional generation capacity of swb Erzeugung. The fair value measurement effect essentially re-flects the change in the value resulting from the recognition of the interest in Osterholzer Stadtwerke GmbH & Co. KG, Osterholz-Scharmbeck. Additionally, the provisions for re-structuring (‘Human Resources 2017’ programme) have been reversed in the amount of 5.4 million euros.

T008

swb segmentin millions of euros 2017 2016



Fair value measurement of other financial instruments −17.0


Investments 0.7 3.3

Restructuring 5.4 0.7

EBIT 61.2 177.7

T009

Group Central Divisionin millions of euros 2017 2016

Operating EBIT −70.1 −51.1

Derivatives 5.4


Impairments −13.0

Investments −0.1 239.8


EBIT −7.3 170.8

reporting period (previous year: 49.7 per cent). Operating EBIT has increased to 70.6 million euros (previous year: 61.2 million euros). In energy sales, operating EBIT was positively influ-enced by the lack of special items such as the formation of provisions for impending losses in connection with the oper-ation of the natural gas fuel station network and the promise of a subsidy to the DLR Institute of Networked Energy Systems (formerly NEXT ENERGY). In the previous year, the telecom-munications business area contained income from a settle-ment with TDG.

Essentially, EBIT was adjusted for the gains from derivative financial instruments and impairments of individual invest-ments. Additionally, the amount in the previous year included the one-off donation to the EWE STIFTUNG.

Our International segment experienced a decline in external turnover of 14.3 per cent to 623.8 million euros (previous year: 727.9 million euros). This decrease is primarily associated with the business in Turkey where earnings declined predominant-ly due to currency conversion. The segment contributed ap-proximately 7.6 per cent to the Group’s total revenue in the reporting period (previous year: 9.6 per cent). Operating EBIT amounted to 24.8 million euros (previous year: 25.6 million euros) and has therefore remained almost stable compared to the previous year.

The non-operative items are primarily reversals of write-downs in Poland and Kayserigaz due to positive business develop-ments, offset by impairments on the part of Millenicom and Bursagaz.

T007

International segmentin millions of euros 2017 2016


Derivatives −6.6 8.1

Reversals of write-downs 60.3

Impairments −28.6

EBIT 49.9 33.7


Our Group Central Division segment only generates a low lev-el of revenue. Operating EBIT amounted to −70.1 million euros (previous year: −51.1 million euros). These earnings resulted from the holding function of EWE AG and the other invest-ments attributed to it. The negative effect on earnings com-pared to the previous year is due primarily to lower rental in-come and higher IT expenses.

The fair value measurements of other financial instruments in the Group Central Division segment include the change in the value of the interest in E3 / DC GmbH, Oldenburg. Com-pared to the previous year, impairments were attributable to buildings and software. Additionally, the previous year com-prises proceeds from the disposal of the shares in VNG with regard to investments, whereas provisions were formed for the cash settlement of in-kind benefits in connection with re-structuring.

As a result of its business activities, our Group has a high in-tensity of investments with the associated capital commit-ment. Due to the increase in total assets as at 31 December 2017, the proportion of non-current assets in the total assets has decreased to 73.1 per cent. The non-current assets are due largely to the increase in other financial assets. This in turn was due to the measurement effects of equity and debt instru-ments. The increase in current assets is primarily due to an in-crease in trade receivables (277.8 million euros) and a significant increase in liquid assets (257.0 million euros). The non-current assets are financed with equity and non-current debt.

T010

Net assetsin millions of euros 31.12.2017 in % 31.12.2016 in %

Assets

Non-current assets 6,652.4 73.1 6,494.8 77.0

Current assets 2,444.7 26.9 1,940.4 23.0

Total assets 9,097.1 100.0 8,435.2 100.0

Equity and Liabilities

Equity 2,084.7 22.9 1,941.9 23.0

Non-current liabilities 5,104.4 56.1 4,745.5 56.3

Current liabilities 1,908.0 21.0 1,747.8 20.7

Total equity and liabilities 9,097.1 100.0 8,435.2 100.0

At 22.9 per cent, the equity ratio has remained almost entirely stable since the previous year. The absolute increase in equity is due primarily to the net income for the period (+256.1 mil-lion euros) and the transition effect of IFRS 9 recognised directly in equity (+4.7 million euros), less the payment of a dividend (−88.0 million euros) and the changes in hedging relationships (−24.2 million euros).

Non-current liabilities primarily encompass contributions to building costs, pension reserves, bonds and liabilities to finan-cial institutions. The latter in particular (+214.7 million euros) are the reason behind the increase over 31 December 2016. Additionally, the interest-induced increase in rehabilitation provisions of 121.6 million euros had a positive effect.

The increase in current debt (+160.2 million euros) is largely the result of the increase in trade payables (+304.5 million euros). The repayment of loans (−149.1 million euros) had the opposite effect.


utilisation of the first extension option and therefore ends in November 2022. As at 31 December 2017, EWE had drawn on a total of 0.0 million euros of this credit line (previous year: 0.0 million euros). The bilateral credit lines available as at the reporting date totalled 556.7 million euros (previous year: 409.4 million euros). Of this amount, 186.5 million euros (pre-vious year: 120.4 million euros) has been drawn on in some form, including as guarantees.

Issuing bonds, bonded loans and registered bonds represents another key component of EWE’s financing. As at 31 December 2017, unsecured bonds quoted in euros with a total nominal value of 1,351.6 million euros (previous year: 1,401.6 million euros) have been issued. Additionally, bonded loans and regis-tered bonds still exist in the amount of 150.0 million euros (previous year: 0.0 million euros). The aforementioned finan-cial instruments have terms ending between 2019 and 2032. They have fixed interest rates between 1.26 per cent and 5.25 per cent.

The cash flow from operating activities represents a key ele-ment of our financing. In the 2017 business year, EWE generat-ed a cash flow from operating activities of 655.8 million euros.

The cash flow from investing activities of −446.2 million euros comprises investments in the infrastructure of the Group in particular (especially grids, renewables and broadband network expansion). The deviation from the previous year is due largely to the received payment of the purchase price for the disposal of the shares in VNG in 2016.

In particular, the cash flow from financing activities comprises higher loans (378.8 million euros) than loan repayments (−225.2 million euros), as well as the payment of a dividend (88.0 million euros) for the 2016 business year. The amount in the previous year is characterised by the buy-back of bonds (448.4 million euros), the repayment of loans (366.8 million euros) and the dividend of 225.5 million euros for the 2015 business year.

The financial flexibility of our Group is secured with bilateral credit lines as well as a syndicated, revolving credit facility of 750.0 million euros. The original five-year term of the syndi-cated credit facility was extended by one year following the

T011

Financial position in millions of euros 2017 2016 Change in %

Cash flow from operating activities 655.8 471.7 39.0

Cash flow from investing activities −446.2 570.8 < −100

Cash flow from financing activities 56.7 −1,033.2 > 100

Changes to cash and cash equivalents 266.3 9.3 > 100

Currency translation and changes to the basis of consolidation −9.0 −9.4 4.3

Cash and cash equivalents at the beginning of the period 352.2 352.3

Cash and cash equivalents at the end of the period 609.5 352.2 73.1

Non-financial performance indicators C O M B I N E D M A N AG E M E N T R E P O R T 45

energy transition. Additionally, skills and abilities in connection with MINT are developed strategically and digital expertise is promoted. The reading-to-learn methods are continuously op-timised and are currently being converted to digital processes and learning methods in many areas. Additionally, decentral-ised training as a plant mechanic in Brandenburg is a new ad-dition. In the 2017 business year, the EWE Group employed an average of 408 vocational trainees (previous year: 395).

University students also have the option of completing their final project at EWE. After earning their degree, graduates can choose from a variety of models (including trainee pro-grammes and entry-level positions) to launch their career at one of the EWE Group’s companies.

Advanced training

EWE brings together three sectors – energy, telecommunica-tions and information technology – that are shaped by rapid technological developments and stiff competition. In order to overcome these challenges, the company offers its employees a wide range of internal and external advanced training op-portunities. We improve and refine these programmes and factor in current trends, such as digitisation or working with lean project management methods. The managers of the Group are the key drivers and designers of the reorientation of EWE. This target group faces significant challenges as part of this role, both with regard to everyday management and to dealing with the specific challenges of our sector. Managerial development in 2017 centred on the opening of the EWE Aka-demie. There, managers are being assisted in implementing the strategy in their fields of responsibility with collaboration skills, customer orientation and agility, negotiation manage-ment and business development courses. The opening of the participant group to all managers and the opening of certain aspects for all employees are attesting to the cultural change in no uncertain terms.

A large number of distinct change processes were carried out in the Group, catering to and moulding the corporate culture, and the teams were involved continuously by means of suit-able formats and instruments.

Comprehensive change and training expertise was the driver of the success of the project NETZ PRO, AK GO and in EWE TRADING. Extensive change architectures focused on skill acquisition, employee qualification and improving the capa-bility of the teams in the organisations – enabling them to pursue the targets of the company – had been developed and some had even been implemented by late 2017.

Non-financial performance indicators

Installed output of renewable energy

In the 2017 business year, the installed output of renewables increased by 374.1 megawatt year-over-year to 425.3 mega-watt in total. The increase is due primarily to the acquisition of the Walsrode, Adorf / Diemelsee, Lichtenau and Garnholt wind farms. Of the total electrical power generation capacity of the EWE Group, renewables account for 29.2 per cent (pre-vious year: 23.7 per cent).

Changes to the number of employees

During the 2017 business year, our Group had an average of 9,134 employees (previous year: 9,048 ). One of the reasons for the increase is the acquisition of the TURBOWIND Group. This figure includes all full-time and part-time employees as well as trainees and temporary staff.

Vocational training

As a predominantly local corporate Group, EWE has a long-term commitment to providing professional training to young people from the region. Through internships and regional and national vocational training fairs and events, secondary school and university students are given the opportunity to acquire an in-depth look at EWE and its business and make their first professional connections. A vocational training programme or combined degree and vocational training programme at EWE goes far beyond the mandatory training content. The young people who participate in a training programme at EWE are provided with a comprehensive range of educational, mentor-ing and recreational activities, from communication training and in-depth economic knowledge to athletics and culture. The trainers are particularly focused on providing support in the development of professional decision-making and respon-sibility, primarily with regard to the requirements of the

T012

Number of employees by segment

2017 2016

Renewables, Grids and Gas Storage 2,119 2,079

Sales, Services and Trading 3,247 3,213

International 1,011 965

swb 2,150 2,178

Group Central Division 607 613

Total 9,134 9,048

46 C O M B I N E D M A N AG E M E N T R E P O R T Non-financial Group declaration

The aim of the EWE Group to increase the proportion of wom-en in managerial positions is reflected in its ambitious targets to be met by 30 June 2022. Whereas on the level of the Board of Management, the company only temporarily failed to ad-here to its target for the proportion of women in 2017, there are not enough suitable young female managers to meet the target on the level of middle management.

Therefore, a variety of support measures designed to increase the proportion of women in managerial positions are focused on young female managers. They are made ready to assume a managerial position through networking initiatives, mentor-ing programmes, dedicated seminars and personalised support measures. The in-house daycare facility supports a work-life balance with a wide range of services.

T014

Target percentages for the top two levels of management of EWE AG

Board or level of management

Percentage of women (as at

31.12.2017)

Target percentage by

30.06.2022 (by 30.06.2017)

Definedby:

Supervisory Board 5.3% 12.5% (12.5%) Board of

Managementof EWE AG

Board of Management 20.0% 24.4% (24.4%)

An extensive offering in the fields of health management and work-life balance rounds out EWE’s advanced training and staff retention activities.

Gender quota

The EWE Group has a great interest in further increasing the percentage of women in managerial positions in the fu-ture. EWE wants to offer women and men the same opportu-nities when filling management positions. In this context, the company relies on both tried-and-tested and new measures to further strengthen the work-life balance and promote diversity in professional and career development. The aim here is to ensure that key positions are filled by the most suitable candidate, regardless of gender.

In light of this, target quotas have been specified pursuant to the German law for the equal participation of women and men in managerial positions in both the private and public sectors. The proportion of women in the Supervisory Board, Board of Management and executive positions, as well as the top two levels of management in the companies to which the law applies, have been defined as follows:

T013

Target percentages for the Supervisory Board and Board of Management of EWE AG

Board or level of management

Percentage of women (as at

31.12.2017)

Target percentage by

30.06.2022 (by 30.06.2017)

Definedby:

Supervisory Board 15.0% 15% (5.0%) Supervisory

Boardof EWE AG

Board of Management 0.0% 20.0% (20%)

Non-financial Group declaration

The non-financial Group declaration for the 2017 business year is available in a separate non-financial Group report on the website https://www.ewe.com/en/investor-relations/ publications/annual-reports for ten years after publication

(the statutory period). The separate non-financial Group report is compiled with the separate non-financial report of EWE AG.

http://https://www.ewe.com/en/investor-relations/publications/annual-reports

http://https://www.ewe.com/en/investor-relations/publications/annual-reports

Report on expected developments and their key opportunities and risks C O M B I N E D M A N AG E M E N T R E P O R T 47

merge in future, especially electricity, heating, telecommuni-cations, IT and mobility. Even now many customers possess their own power supply systems and infrastructure. This means that in the energy industry, it is a question of recognising cus-tomers as partners who not only purchase electricity, but also generate it. The increasing granularity of the energy system is not a mandatory prerequisite to a successful energy transi-tion. Following the Europeanisation of the energy transition and the related scale effects, a scenario with increased inter- regional load smoothing instead of regional optimisation is not unlikely.

Furthermore, markets and politics will demand even greater efficiency in all business segments. The transition to tender-ing for onshore wind, offshore wind and solar power has lead to significantly more transparency, competition and price re-ductions throughout Europe. The production costs for offshore wind have fallen below 100 euros per MWh and solar power and onshore wind are already far below this threshold. Returns are being limited further in regulated markets, merit orders and market mechanisms are resulting in low electricity prices and the high level of stock exchange liquidity is bringing about transparency and dynamism. New technologies are lowering transaction costs and new sales channels no longer target small markets with a 100 per cent market share, rather are generating dynamic, adaptable structures and systems. All of these factors are increasing the efficiency requirements faced by all market participants.

Digitisation is both an unavoidable consequence of underlying technological and societal developments and a necessary pre-requisite for a sustainable, cost-effective energy supply. It will cause fundamental changes in customer habits, the culture and organisation of companies, the rendering of services and in value-creating structures and business models. Half of all electricity and gas provider switches already take place on-line – and many customers only see offers when they are avail-able online or can be purchased using a smartphone. Digitisa-tion will lower the transaction costs of product creation and customer interfaces and facilitate the development of new business models.

Report on expected developments and their key opportunities and risks

Forecast report

Business environment forecast

The Paris Agreement and the 2050 climate targets agreed therein require the rapid decarbonisation of not only the elec-tricity and heat markets, but also of the mobility and indus-trial sectors.

Therefore, the generation of electricity from renewable sourc-es will continue to grow in significance. In light of technolog-ical advances and the markets, costs can be expected to fall. For example, the costs of generating electricity from renew-able sources have decreased significantly in recent years. The price of solar power in sunny regions is now lower than power generated using oil, coal and even natural gas. The same goes for onshore wind energy which even now can demonstrate exceptionally competitive generation costs in good locations. The increasing volatility of energy generation is causing de-mand for flexibility and network stability to rise and leading to market growth in these segments. Initially, considerable growth in the electricity storage market is necessitating an adjustment to the general regulatory conditions. Necessary back-up capacity in the form of natural gas will be made avail-able in Germany and on an international level in the event of an accelerated withdrawal from coal by 2030.

The decarbonisation of the heat market is facing considerable obstacles. The current rates of rehabilitation as well as the heating technology and building shells in place will likely lead to the heat market being dominated by natural gas. However, heat pumps will likely become more established in new builds. The current gas infrastructure remains essential to buildings.

The ongoing liquidity of the European gas market is preventing the gas storage market from recovering. The decrease in Dutch and German low-calorific gas production might give rise to temporary market opportunities for gas storage in low- calorific gas market areas until the end of the market region transition from low-calorific to high-calorific gas.

From a current perspective, the energy landscape will become further decentralised and access to customers will be a crucial factor. We believe that various markets and products will

48 C O M B I N E D M A N AG E M E N T R E P O R T Report on expected developments and their key opportunities and risks

grid operators. For one, in future energy consumers will be entitled to demand a dynamic energy tariff from their energy provider, i.e. a variable energy tariff which differentiates be-tween the intervals of the wholesale market, enter into agree-ments with aggregators without the consent of other market participants and change supplier free of charge. Additionally, consumers will be entitled to produce, consume, store or trade their own renewable energy in all segments of the market. This proposal is comprehensive and will affect almost all of the electricity-related business areas of the EWE Group.

Renewable Energy DirectiveThe proposed revision of the current Renewable Energy Direc-tive aims to set out the framework for ensuring that the binding target of at least 27 per cent renewables in the final energy con-sumption in the EU by 2030 is met. The proposal sets out re-quirements for financial subsidies for renewables, for opening subsidy schemes for other Member States, for the independent generation and consumption of green electricity, for authorisa-tion processes, for using renewable energy for refrigeration, heating and transportation, for partnerships between Member States and with third countries and for guarantees of origin and sustainability criteria for biofuels. This European framework will have a significant impact on the investment conditions and our business activities in the field of renewable energy.

Energy Efficiency Directive and Energy Performance of Buildings DirectiveThe proposal for a new Energy Efficiency Directive sets out a common framework for measures designed to promote ener-gy efficiency within the EU in order to ensure that energy ef-ficiency increases by 20 per cent by 2020 and by 30 per cent by 2030. It also contains rules on removing barriers in the energy market and correcting market shortfalls that impair the efficiency of the supply and consumption of energy. It also paves the way for setting national energy efficiency targets for 2020 and 2030. The proposal for a new Energy Performance of Buildings Directive aims to introduce a partially mandatory roll-out of the infrastructure necessary for e-mobility.

The rules will largely determine the general conditions of our business activities in connection with energy efficiency, for example e-mobility charging infrastructure, smart home solu-tions, energy consultation, energy audits and contracting.

Future political and regulatory conditions

As part of its implementation of a general strategy for a Euro-pean energy union and the decisions of the Council of Europe regarding the 2030 climate and energy framework of the EU, the European Commission has published a number of legisla-tive proposals, most recently in the package ‘Clean Energy for All Europeans’ in November 2016. The following dossiers will potentially have the greatest direct influence on our business activities and are currently in the legislative pipeline.

A reformed EU emissions trading scheme (ETS)In order to realise a 40 per cent cut in greenhouse gas emis-sions in the EU by 2030 (compared to 1990 levels), the Euro-pean Commission proposed a structural reform of the EU ETS for the period between 2021 and 2030. For one, the annual reduction factor of the current certificates is to be increased. However, the protective measures required to protect industri-al competitiveness in Europe must also be upheld. The political talks are largely complete. The new regulations are expected to come into effect on 1 January 2019. The structure of the EU ETS could have a considerable effect on the costs of conventional generation, energy-intensive industries and the conditions for investing in low-CO2 technologies. The EWE Group is therefore committed to an effective, stable system which protects in-dustries competing on an international level at the same time.

Regulation on the internal market for electricityThe proposal for a new regulation on the internal market for electricity published in November 2016 aims to redefine the regulations and key principles of the European internal market for electricity. The new regulation is expected to set out regu-lations for the feed-in of renewable energy and for cross- border participation in order to ensure the security of supply (includ-ing regulations on capacity mechanisms). It will also set out principles for a market-based, cross-border electricity market. The proposed regulations would therefore affect the trading activities of the Group, its power distribution grids and its busi-ness with renewable energy in particular. The legislative pro-ceedings for this and the following dossiers will end in the first six months of 2018 at the latest and then come into effect.

Internal electricity market directiveThe proposal for a new directive seeks to introduce common rules for the internal electricity market and set out the legal framework for the roles and rights of consumers, for independ-ent energy generation and aggregators and explains the duties and obligations of transmission grid operators and distribution


Governmental broadband strategy2018 will be a crucial year for telecommunications regulation. The new German government will define a new broadband strategy for Germany. We can expect a clear gigabit target, probably by 2025. This will also affect the conditions of sub-sidies. Additionally, experts are discussing whether and to what extent the regulation of fibre-optic connections is necessary and advisable. The previous German government believed that the full deregulation of Telekom would be a suitable way to move the leading company to change its strategy from copper- based technology to fibre optic expansion. Initially as part of its market analysis, the Federal Network Agency will examine whether changes in market conditions will give cause for changes to the current regulatory regime. The first draft of a decision from the Federal Network Agency can be expected over the course of the second quarter of 2018.

Fibre optic expansion project of EWEIn December 2016, EWE decided to invest 1.2 billion euros over the next few years in order to provide households with direct fibre optic connections. This investment could open up around 30 per cent of the total potential customer base in the EWE service area. EWE is also in talks with other companies about co-investment solutions so as to provide the entire region with future-proof, high-performance telecommunications infra-structure. One of the first key milestones has already been reached: in December 2017, EWE and Deutsche Telekom an-nounced their plans to establish a joint venture through which they could jointly spur on fibre optic expansion in the north-west. This joint venture – in which each partner is to hold a 50 per cent stake – is expected to connect around one million households to the fibre optic network directly. The project is due to start in mid 2018, yet is still subject to the approval of the cartel authorities.

New EU legal framework in sightThe trilogue negotiations started in October 2017 after the parliamentary vote on the draft directive for a revised legal framework for telecommunications. These negotiations are necessary because the Council in which the governments of the Member States are represented did not agree with the amendments proposed by the Parliament. Now, compromises are to be drawn up over the next few months under the su-pervision of the European Commission. EWE’s priority is to largely limit symmetrical regulation that is not dependent on a strong market position so as not to impede investments in

The German Market Master Data Register Ordinance (MaStRV)Pursuant to the MaStRV which came into effect on 1 July 2017, a market master data register should have been introduced in summer 2017. This is now likely due to take place in summer 2018. The MaStRV aims to build a comprehensive official reg-ister of the electricity and gas markets that can be used by the authorities and market players in the energy sector. The reg-ister has been designed to unify, simplify or completely do away with various official duties of notification through the central register.

Exception for tenders for windWith regard to the invitations to tender for onshore wind in 2017, the majority of contracts were awarded to energy coop-eratives. During invitations to tender, energy cooperatives enjoy privileges; for example, they are not required to obtain per-mission under the German Federal Immission Control Act (BImSchG) to apply. In response to the results, the German Bundestag imposed a moratorium on privileges for energy co-operatives. It applies to the first two of the three auction rounds in the coming year. Afterwards, the results are due to be eval-uated again. EWE advocates the full abolition of privileges for energy cooperatives as they are anti-competitive and it is not clear that the projects will even be realised at all.

Constitution of a national governmentThe election of the 19th Bundestag was held on 24 September 2017 and the opening session took place on 24 October. The former government has remained in power since then as no new government has yet been formed. It remains to be seen when this will happen and who will form the new government. Union and SPD opened coalition talks in late January 2018. These talks are based on a joint white paper from 12 January 2018 in which the parties embrace the climate targets and announce their intent to implement a series of measures fol-lowed by a law in 2019 in order to achieve them. In this regard, they are focused on the climate targets for 2030. The white paper contains positive points such as the announcement of special invitations to tender for renewables, although some important aspects remain unmentioned and often vague.

The acting government possesses the same authority as a reg-ular government. However, given standard governmental prac-tice, the acting government is not expected to make any far-reaching decisions that would bind a subsequent government.


Expected performance in the Renewables, Grids and Gas Storage segmentIn the 2018 business year, we expect the operating EBIT of the Renewables, Grids and Gas Storage segment to be lower than in 2017, due largely to regulatory effects in connection with networks.

The investments due to be made in the Renewables, Grids and Gas Storage segment in 2018 total approximately 444 million euros. The investments are mostly in the infrastructure of the electricity, gas and telecommunications networks (approx. 294 million euros) and in onshore wind farms (approx. 127 mil-lion euros).

Expected performance in the Sales, Services and Trading segmentIn the 2018 business year, we expect the Sales, Services and Trading segment to generate a lower operating EBIT than in 2017.

Energy sales are facing strong competition. Slight increases in sales quantities and shrinking electricity and gas margins are expected, as is a stable base of private customers. Margins are also expected to shrink with regard to business customers (in-cluding due to the increasing level of competition). In contrast, positive contributions to earnings are expected from energy trading due to energy storage, gas portfolio optimisation and expanded direct marketing activities. Initial losses are expected from the expansion of e-mobility activities.

EWE plans to make investments totalling approximately 99 million euros in the Sales, Services and Trading segment in 2018. Of the key investments, around 62 million euros have been invested in broadband and fibre optic expansion, back-bone network expansion and other areas of technology. With regard to energy sales, heating plants in particular experi-enced growth. Other investments are planned, especially in order to expand e-mobility and in the field of large-scale battery storage.

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Renewables, Grids and Gas Storage segment −10% to +0% 388.8

Sales, Services and Trading segment −30% to −15% 70.6

International segment −60% to −45% 24.8

swb segment −80% to −60% 89.3

Group Central Division – −70.1

Operating EBIT, EWE Group −30% to −15% 503.4

fibre optic expansion. Additionally, EWE is in favour of coop-erative regulations that are focused on competition and ap-propriate for the market. Once the directive has been passed and come into effect, the changes will have to be implement-ed into the national German Telecommunications Act (TKG). The entire process is therefore not expected to come to a close before 2020.

Start of operations of EWE NETZ RVN GmbH from 1 January 2018From 1 January 2018, EWE NETZ is obliged to use a standard-ised price sheet for gas distribution grid charges in order to meet the criteria of the Federal Network Agency. EWE NETZ has filed an appeal against the decision of the Federal Network Agency with the OLG of Düsseldorf. Furthermore, as a pre-cautionary measure, EWE NETZ established EWE NETZ RVN GmbH, Oldenburg, a 100 per cent subsidiary of EWE NETZ, which will supply the customers of the regional distribution network from 1 January 2018 in order to comply with the Fed-eral Network Agency’s principle of ‘one company / one price sheet’ without discrimination whilst preventing unreasonably high price increases for customers connected to the regional distribution network.

Expected performance of the EWE Group

We use the aforementioned expectations and assumptions as to sector-specific developments and the general political and regulatory landscapes to make forecasts concerning the EWE Group and its segments for the 2018 business year.

The forecast does not include the effects of legal develop-ments. Our forecasts concern our key performance indicator operating EBIT, adjusted for unforeseeable special items.


EWE plans to make investments totalling approximately 167 million euros in the swb segment in 2018. The focus here is on investments of around 117 million euros in grid infrastruc-ture as well as investments of around 20 million euros in re-newable energy.

Report on risks and opportunities

Principles of risk and opportunity management

The fields of business of the EWE Group continue to be char-acterised by a high level of dynamism and ongoing change. Our business activities are therefore linked with substantial risks and opportunities. The early identification and active management of these risks and opportunities is an integral element in the planning and implementation of our business strategies. This way we can support the sustainable growth and secure the long-term competitiveness of the EWE Group.

The Board of Management and risk committee set out the un-derlying risk management system for the business operations of the EWE Group. Additionally, regular reports to the decision- making and supervisory committees ensure transparency in connection with the current risk profile of the EWE Group and the continuous monitoring of the parameters of the risk man-agement system.

Process of risk and opportunity management

Within the EWE Group, the internal control system and the risk management system are implemented through an inte-grated risk management approach using standardised methods and processes. The risk management system is based on a standardised planning and controlling process tailored specif-ically to the Group. During its audits, the internal auditing de-partment regularly verifies the management’s assessment of the key risks and the effectiveness of the key controls in the processes it is auditing. The risk management system was last audited in the fourth quarter of 2017.

Risks are identified early on, evaluated and reported to the EWE Group’s Group-wide risk management at the level of the individual companies responsible for the risks in a structured, ongoing process with consideration for the Group-wide guide-lines. Risk management involves measures designed to avoid, minimise and overcome risks.

The EWE Group’s energy-trading activities are also subject to separate risk guidelines which define risk assessment and man-agement instruments tailored specifically to the energy trade.

Expected performance in the International segmentIn the International segment, EWE expects a decrease in oper-ating EBIT in the 2018 business year compared to 2017.

With regard to gas trading in Turkey, the gas trading volumes for 2018 are forecast on the basis of current contracts. The general conditions of the energy business remain difficult, which puts pressure on the slightly positive contribution to earnings forecast. The development of earnings for the regions of Bursa and Kayseri will be heavily influenced by regulatory plans. Overall, this will lead to a decrease in the operating EBIT of Bursagaz due to lower grid fees. We expect the operating EBIT of Kayserigaz to be higher due to moderate network ex-pansions and improved tariffs compared to 2017. We continue to expect the number of customers and gas sales of Bursagaz and Kayserigaz to grow. Furthermore, the business activities of the Turkish telecommunications company Millenicom will have a negative impact on earnings.

In Poland, positive contributions to earnings are expected from electricity and external gas sales in particular, although these will be offset somewhat by higher personnel and operating ex-penses as well as initially negative effects of business develop-ments.

The investments planned for 2018 in the International seg-ment total approximately 35 million euros and primarily apply to developing business areas in Turkey (33 million euros). Es-sentially, investments in grids and expansion in the Bursa and Kayseri regions are planned.

Expected performance in the swb segmentIn the swb segment, we expect operating EBIT in the 2018 business year to be significantly lower than in 2017. For one, this is due to the passing of the German Grid Tariff Moderni-sation Act (NEMoG) in 2017 and its implementation in 2018. This Act brings with it a significant (and permanent) reduction in revenue from avoided grid tariffs. The operating EBIT of the grid operators has also been affected as their revenue will de-crease significantly due to regulatory requirements.

The Sales business area must face strong competition with only limited pricing options when it comes to the sale of pow-er and natural gas. Overall, the operating EBIT from sales will increase due to the decreasing grid fees and the integration of elements of swb Abrechnungsservice GmbH, Bremen.


The company is working to open up new business models. These are not yet established in the market and investments in them are therefore highly risky. In order to manage these challenges, the Group has established an innovation process and assumes a limited amount of risk in terms of venture capital.

Its future growth will mainly be realised through partnerships instead. This will increase the ability of the company to adapt to changes in the general conditions. Likewise, divestitures are being examined and steps are being taken towards inorganic business expansions that would make it possible to rapidly open up each line of business. The company has therefore optimised its mergers and acquisitions processes.

Besides the German energy market, in recent years the EWE Group has established itself and its activities in the Polish and Turkish energy markets. This has resulted in additional growth opportunities that are, to a large extent, unaffected by the developments in the German market, yet utilise the EWE Group’s existing areas of expertise. The country-specific risks inherent to the International segment are monitored sys-tematically in this regard.

The political risk faced by the Turkish companies of the EWE Group has increased significantly ever since the unsuc-cessful coup by elements of the Turkish military in July 2016 and the measures them implemented by the Turkish govern-ment. There are currently no specific indications of short-term adverse effects on the business activities of Turkish EWE com-panies (such as non-fulfilment of contracts, termination of contracts without notice or official sequestration of Turkish EWE companies). No potential medium or long-term adverse effects are currently foreseeable. The emergence of political risks can negatively affect the stability of the value of foreign investments in the EWE Group, both directly and indirectly.

The significant risks that can be categorised as strategic risks and opportunities are rated moderate and low in financial terms.

Risks are assessed by probability of occurrence and amount of damage. They are assigned to one of three risk categories: low, moderate and high, which represent the potential loss that the EWE Group would suffer.

The following section describes risks and the most significant negative effects they might have on our business, assets, fi-nancial position, results of operations and reputation. Oppor-tunities often stand directly opposite the corresponding risks and are assigned to the same categories and reported in them.

Risks and opportunities

Strategic risks and opportunitiesChanges to the international macroeconomic market environ-ment as well as adjustments to underlying legal and social conditions increase the potential risk to the company’s long-term business development as it pertains to key financial target figures in the EWE Group’s individual segments.

This applies to the field of conventional power generation, which is affected by the significant increase in the capacity from renewable energy sources available on the power market. Additionally, the NEMoG has had an impact on energy gener-ation. In terms of gas storage, the changes in the competitive situation and market are taking hold. This has made it neces-sary to open up new revenue generation potential which comes with technical and market-related risks. With regard to reve-nue, the sales department is facing a continuous decline in consumption due to changes to customers’ consumption pat-terns, improving energy efficiency and increasingly decentral-ised energy solutions from individual customers (prosumers).

The underlying conditions governing the energy sector con-tinue to be heavily influenced by the ‘German energy turn-around’ enacted by the German government.

Society’s increasing digitisation is creating opportunities for energy service providers such as EWE. At the same time, it is leading to a reduction in barriers to market entry for compet-itors from other industries.

In particular, the interaction between energy, telecommuni-cations and information technology makes new product of-ferings with increased customer benefit as well as competitive differentiation possible. In addition, the combination of energy, telecommunications and information technology creates the conditions necessary to continue the stable and efficient op-eration of grids and networks, despite ever-increasing demands.


Risks and opportunities from business operationsOperative risks to the EWE Group result both from the opera-tion of technologically complex systems at all stages of the val-ue creation chain as well as due to unscheduled interruptions to scheduled process work flows. EWE utilises state-of-the-art information and communications technology to efficiently support all of the individual units’ business processes. Further-more, extra quality assurance and coordinated redundancy concepts have been implemented to guarantee the reliability of processes, which are continuously enhanced in line with the requirements.

Given the increasing proliferation of digitisation in the busi-ness processes of the EWE Group, they have become depend-ent on secure, reliable and robust information processing. Therefore, risks to information security are becoming more significant both in the eyes of the company and from a legal perspective. The key objective of the information security department is therefore the appropriate handling of informa-tion and data in line with their confidentiality levels in order to ensure the effective, comprehensive control of information security risks.

Our operative activities are subjected to regular external au-dits. This is reflected by a range of ISO certifications in par-ticular. Additionally, employees are involved in a system of continuous training designed to maintain and improve the high level of quality, minimise potential risks and identify new op-portunities. We are also an active member of and have repre-sentatives on a number of expert committees and boards. This guarantees a structured approach to current and future chal-lenges, measures relating to safety and statutory regulations.

The significant risks that can be categorised as risks and oppor-tunities from business operations are rated low in financial terms.

Financial risksFinancial risks result from the operative business activities of the Group’s various business areas in the form of liquidity, credit and valuation risks.

The EWE Group utilises a structured liquidity management process to confront general liquidity risks, which is used to manage and plan the changes to liquidity over the short, me-dium and long terms. In addition, the EWE Group maintains a sufficient level of liquidity reserves in the form of liquid funds and credit lines to ensure the Group can meet its financial ob-ligations at any time.

Market price risks and opportunities as well as quantity risks and opportunitiesDue to increasing competitive pressure in the national and inter-national energy procurement and sales markets, the EWE Group is faced with constantly high market price, quantity and margin risks, primarily in the areas of generation and sales.

The competition in energy sales is being exacerbated by dis-ruptive business models based on technological innovations, online price comparison platforms and the emergence of new market actors that previously operated in other sectors.

Additionally, energy sales to end customers are exposed to the risk that the actual sale deviates from expectations in terms of quantity or structure. Gas consumption in particular is highly dependent on weather conditions. This results in quantity risks to both sales and network operations. On the other hand, the possibility of a weather-related increase in consumption also exists. Unscheduled changes to cost elements outside of EWE’s control could also have a negative effect on margins, both in sales as well as in network operations. We use sophisticated planning and forecasting methods in order to counter the risks and manage the opportunities. Addition-ally, the sales quantities in power and gas sales are secured via long-term procurement strategies.

In the field of conventional power generation, the attainable margins (‘spreads’) remain under pressure. Over the course of the German energy turnaround, supply has increased as a result of additional capacities from renewable energy sources that are not or only slightly affected by the market prices due to subsidy mechanisms.

In the Turkish market, which is going through the process of deregulation, imbalances still exist in the formation of prices. Unlike gas purchasing, the prices of gas sales are set by the national gas supplier BOTAS A.S, Ankara, Turkey. The afore-mentioned effects of weather conditions apply in similar fash-ion to the Group’s gas business in Turkey, and result in the same opportunities and risks.

The significant risks that can be categorised as market price risks and opportunities as well as quantity risks and opportu-nities are rated low in financial terms.


The significant risks that can be categorised as legal and com-pliance risks are rated moderate and low.

In its meeting on 8 September 2017, the Supervisory Board of EWE AG discussed and agreed a final evaluation of the results of the final reports of the audit firm KPMG which investigated possible misconduct at EWE in spring and summer 2017. The investigation focused on resolving matters, examining exist-ing allegations and evaluating the legal nature of the identified matters. Additionally, recommendations for improving inter-nal procedures with a focus on processes and controls were drawn up.

Finally, the Supervisory Board of EWE AG determined that the investigations which had run for several months had not found any evidence to vindicate the – partially anonymous – allega-tions of corruption against employees of EWE NETZ with a sufficient degree of certainty.

Risks from the use of financial instrumentsWithin the scope of risk management activities carried out by the EWE Group, financial risks are identified, evaluated and addressed. Financial instruments are regularly used when im-plementing hedging strategies.

The EWE Group mainly uses derivative financial instruments to hedge against market price risks resulting from physical gas and electricity trading. Additionally, the Board of Management of EWE AG has granted the Group’s own trading company lim-ited authority to take speculative steps in order to optimise its portfolio. The risk posed by market price risks to earnings is limited by an in-depth risk monitoring and loss limitation con-cept. Additionally, the use of derivative financial instruments is always linked with counterparty risks (see also financial risks).

To hedge against energy trading and finance-related price risks, the EWE Group utilises power futures, gas futures, coal swaps, oil swaps, EUA and CER futures contracts (European Union Allowances and Certified Emissions Reductions) as well as currency and interest rate hedges.

More disclosures regarding financial instruments can be found in the notes.

The significant risks that can be categorised as risks from the use of financial instruments are rated low in financial terms.

EWE conducts an intensive analysis of the creditworthiness of major customers, wholesale partners and banks with the goal of preventing or limiting non-payment risks in Germany and abroad.

In general, the EWE Group is exposed to risks from changes in value that can inherently result from increasing capital mar-ket interest rates, fluctuating exchange rates as well as the business prospects of individual companies becoming perma-nently worse.

Fundamentally, the external rating of EWE AG is at risk of being downgraded. The development of and influences on its rating are monitored continuously and appropriate measures are implemented where possible.

The significant risks that can be categorised as financial risks are rated low in financial terms.

Legal and compliance risksWithin the scope of its business activities in Germany and oth-er countries in which it is active, the EWE Group is faced with numerous legal risks and result from both general legal pro-visions as well as special, industry-specific legal, regulatory and miscellaneous requirements.

All relevant legislative and legal developments are being mon-itored continuously and their potential impacts on business operations are assessed.

Likewise, the EWE Group can be exposed to risks resulting from legal disputes or governmental or official procedures. We can-not rule out the possibility that the outcomes of these legal disputes and procedures might have a negative effect on our business, assets or results of operations.

To cover significant legal risks, we have taken out a liability in-surance policy which the management considers adequate and reasonable. However, our insurance does not protect us against any damage to our reputation. Additionally, through legal dis-putes we can suffer losses beyond the amount covered by our insurance, not covered by our insurance or in excess of any pro-visions we have formed for losses from legal disputes.

In addition to general legal risks, the EWE Group is exposed to an increasing number of compliance risks. These risks result from increased activity on the part of national and EU lawmakers.


The individual companies are responsible for their own book-keeping, which is subject to various local standards, whereby the accounting-related ICS is tailored specifically to the needs of each company on the basis of Group-wide guidelines. In its position as a holding company, EWE AG carries out central accounting duties. This includes consolidating figures and ana-lysing the recoverability of goodwill on the balance sheet.

The accounting guidelines standardised across the Group, which must be consistently applied by all units, form the con-ceptual framework for the preparation of the consolidated fi-nancial statements. EWE continuously analyses and takes into account new laws, accounting standards and other official statements with regard to their relevance and effects on the Group’s consolidated financial statements and combined man-agement report.

The annual financial statements submitted by EWE AG and its subsidiaries, which are based on the accounting entries record-ed by each unit, form the data basis used to prepare the con-solidated financial statements. The Group’s financial state-ments are drawn up using the consolidation process based on the annual reports submitted. The steps required to prepare the consolidated financial statements undergo both manual and automated reviews.

Within the scope of external reporting, the members of EWE AG’s Board of Management must take a ‘balance sheet oath’ and sign a responsibility statement. By signing this state-ment, they confirm adherence to the mandatory accounting standards as well as the EWE Group’s accounting guidelines as codified in the Group’s accounting handbook, and that the figures presented give a true and fair view of the Group’s net assets, financial position and results of operations.

Potential financial reporting risks are identified at the division level based on quantitative, qualitative and process-related criteria. The company’s generally binding guidelines represent a fundamental component of EWE’s ICS. In addition, EWE de-fined minimum requirements governing the key processes used to secure an integrated system of data collection and man-agement. An annual review is used to verify whether the nec-essary monitoring measures were appropriate, actually took place and were carried out correctly. Furthermore, the ICS is reviewed by the Group auditing department during the year as part of its auditing programme.

Summary of the risk situation

The Group risk management system did not identify any threats to the continued existence of the company in the 2017 busi-ness year or beyond, either individually or in their entirety.

In the 2017 business year the effectiveness of the internal con-trol system was tested and confirmed by a self-assessment of all key controls.

Key characteristics of the EWE Group’s accounting-related internal control system (pursuant to Section 289 (5) and Section 315 (2) no. 5 HGB)

The aim of EWE’s financial reporting activities is for our annu-al and interim reports to provide complete and correct infor-mation to all interested parties. Our accounting-related inter-nal control system (ICS) aims to identify potential sources of error and limit the resulting risks. The accounting-related ICS encompasses accounting and financial reporting across the entire EWE Group.

The Supervisory Board’s audit committee regularly reviews the effectiveness of the accounting-related ICS. Once a year, the Board of Management reports to the audit committee re-garding the risks from financial reporting, explains the imple-mented supervisory measures and illustrates how the correct implementation of these measures was verified.

The structure of the accounting-related ICS results from the or-ganisation of EWE’s accounting and financial reporting process.

One of the main functions of this process is the management of the EWE Group and its operative units. In this context, the targets set by the Board of Management of EWE AG form the initial points of reference. Based on these targets and EWE’s expectations with regard to the company’s operative develop-ment, once a year the company creates its medium-term plans. These encompass target figures for the upcoming business year as well as the following years. For current business years, EWE draws up forecasts which are reviewed and adjusted at regular intervals. The Board of Management of EWE AG as well as the boards of management and CEOs of the company’s main sub-sidiaries meet at regular intervals to evaluate quarterly and annual financial statements and update forecasts.

56 C O M B I N E D M A N AG E M E N T R E P O R T Current situation of EWE AG

the increase in income from investments largely resulting from the dividend of swb AG and the write-ups of EWE Polska Sp. z o.o., Poznań, Poland (42.0 million euros), EWE TEL GmbH, Oldenburg (11.6 million euros), and EWE GASSPEICHER GmbH, Oldenburg (3.6 million euros).

The net interest was influenced primarily by interest payable on bonds, loans from financial institutions and the bonded loan as well as interest income from Group companies. In the reporting year, the negative net interest (−84.9 million euros) improved by 57.5 million euros year-over-year. Interest income declined by 0.2 million euros. This was due to the persistent-ly low market interest rate that EWE AG offers the subsi diaries as part of cash pooling and for loans. The decrease in interest expenses (of 57.8 million euros) was mainly due to lower ex-penditure in connection with the issued interest-bearing loans (−60.8 million euros). Unlike in the previous year, no prepay-ment penalties were paid in connection with the premature buy-back of bonds in the 2017 business year. In contrast, in-terest expenses for provisions increased by 5.3 million euros, due essentially to pension provisions.

In 2017, personnel expenses decreased by 9.6 million euros. This was due primarily to higher expenditure from the cash settlement of in-kind benefits of the employees of EWE AG (3.9 million euros) in the previous year. Furthermore, the ba-sic remuneration and one-off payments to employees fell by 4.0 million euros.

Amortisation, depreciation and impairment decreased by 13.5 million euros year-over-year, reaching 19.0 million euros. This was due primarily to 4.3 million euros in write-downs of intangible assets and 6.4 million euros in write-downs of build-ings in the previous year.

The tax expenses increased by 15.5 million euros due to the development of the financial result and the necessary forma-tion of tax provisions.

Due to the aforementioned effects, the income after taxes decreased by 239.2 million euros, resulting in a deficit of 136.9 million euros for the 2017 business year (previous year: profit of 103.9 million euros).

Current situation of EWE AG

The annual financial statements of EWE AG, with headquar-ters in Oldenburg, Germany, were prepared in accordance with the provisions of the German Commercial Code (HGB).

EWE AG manages the EWE Group as its holding company. Its duties lie in the strategic and cross-market development of the business areas as well as strategic planning and assuring the Group’s financing. In addition, EWE AG performs central-ised corporate services for the Group’s companies.

Essentially, the results of operations of EWE AG comprise in-come from the performance of centralised services for Group companies, related material expenses, income from financial assets and net interest.

Compared to the previous year, the income from financial as-sets is 285.9 million euros lower due to lower income from the disposal of interests (−103.3 million euros) and amortisa-tions of financial assets comprising write-downs of swb AG (349.2 million euros) and EWE Turkey Holding A.Ş., Istanbul, Turkey (31.3 million euros), in 2017. This was balanced out somewhat by higher income from the assumption of gains and losses (+66.0 million euros), especially due to higher profits from EWE VERTRIEB GmbH, Oldenburg, and EWE NETZ GmbH,

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Results of operationsin millions of euros 2017 2016

Profit / loss from financial assets 92.2 378.1

Net interest income / expense −84.9 −142.4

Revenue 198.0 199.8

Other operating income 5.8 6.0

Material expenses −115.0 −102.7


Depreciation, amortisation and write-downs −19.0 −32.5

Other operating expenses −71.9 −67.8


Income after taxes −136.9 102.3

Other taxes 1.6

Annual deficit / profit −136.9 103.9

Profit carried forward from previous year 4.1 3.3

Withdrawals from the capital reserves 132.8

Withdrawals from allocations to revenue reserves 88.0

Allocations to reserves −15.0

Net profit 88.0 92.2

Current situation of EWE AG C O M B I N E D M A N AG E M E N T R E P O R T 57

As the total assets remained stable compared to the previous year, the equity ratio fell to 34.7 per cent (previous year: 40.6 per cent). In addition to equity, non-current assets are accom panied by non-current debt with a value of 1.8 billion euros. As such, non-current assets (3.0 billion euros) were completely covered by non-current available capital (3.2 billion euros).

The non-current debt comprises bonds (1.4 billion euros), long-term loans (0.3 billion euros) and pension provisions (0.1 bil-lion euros).

The 289.4 million euro increase in non-current liabilities con-sists of the issuance of a bonded loan of 150.0 million euros, the issuance of bonds totalling 100.0 million euros and the 39.4 million euro increase in non-current liabilities to finan-cial institutions.

The current liabilities of 0.7 billion euros are dominated by liabilities to affiliated companies and are 93.1 million euros lower than in the previous year. In particular, this is due to the repayment of short-term loans (−150.0 million euros), the 11.8 million euro increase in loans and the reduction of other liabilities (14.4 million euros), essentially from taxes. In con-trast, liabilities to affiliated companies increased (93.1 million euros) due to cash pooling and provisions (8.5 million euros).

EWE AG’s balance sheet total at the end of the reporting pe-riod stood at 3.9 billion euros (previous year: 3.9 billion euros) and exhibited a well-balanced asset and capital structure. The balance sheet is structured around EWE AG’s functions as the parent company of the EWE Group, in which the key share-holdings are held. Fixed assets represent the dominant item on the asset side, with a value of 3.0 billion euros, equal to 76.7 per cent of total assets (previous year: 81.6 per cent); the most significant item is the financial assets worth 2.8 billion euros (previous year: 3.0 billion euros). The decrease compared to the previous year was essentially the result of a write-down of the shares in swb AG totalling 0.3 billion euros.

The value of current assets including deferred expenses and accrued income increased to 903.7 million euros (previous year: 712.1 million euros). As in the previous year, the item is dominated by liquid assets, receivables from affiliated com-panies from cash pooling and profit and loss transfer as well as securities, and reflects EWE AG’s financing role. The increase of 191.6 million euros over the previous year was essentially caused by a 237.6 million euro increase in liquid assets and a 50.0 million euro increase in securities. On the other hand, receivables and other assets decreased by 91.4 million euros, due primarily to cash pooling (−63.5 million euros).

On the liabilities side, the annual deficit of 136.9 million euros and the withdrawal of 88.0 million euros from the revenue re-serves to be distributed to the shareholders caused equity to decrease to 1.3 billion euros (previous year: 1.6 billion euros).

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Net assetsin millions of euros 31.12.2017 in % 31.12.2016 in %

Assets

Fixed assets 2,978.1 76.7 3,156.9 81.6

Current assets 891.3 23.0 696.4 18.0

Accrued and deferred items 12.4 0.3 15.7 0.4

Total assets 3,881.8 100.0 3,869.0 100.0

Equity and Liabilities

Equity 1,346.5 34.7 1,571.5 40.6

Provisions 168.1 4.3 159.6 4.1

Liabilities 2,367.1 61.0 2,137.7 55.3

Accrued and deferred items 0.1 0.2

Total equity and liabilities 3,881.8 100.0 3,869.0 100.0

58 C O M B I N E D M A N AG E M E N T R E P O R T Current situation of EWE AG

Investments

In the 2017 business year, investments amounted to 554.6 mil-lion euros:

The investments in financial assets are spread across acquisi-tions of interests, capital increases by affiliated and associat-ed companies and short and long-term loans. The additions to the shares in affiliated companies resulted from the capital increase by EWE ERNEUERBARE ENERGIEN GmbH, Oldenburg (6.0 million euros), Grünspar GmbH, Münster (1.3 million euros), and three new start-ups in Berlin (totalling 6.6 million euros). With regard to investments, EWE AG acquired 1.0 per cent of the shares (3.2 million euros) of European Energy Exchange AG, Leipzig, and 22.9 per cent of Wärmeversorgungsgesellschaft Königs Wusterhausen mbH, Königs Wusterhausen (1.2 million euros), in the reporting period. Additionally, there were limited partner’s capital contributions for GWAdriga GmbH & Co. KG, Berlin (1.6 million euros), and Trianel Windkraftwerk Borkum II GmbH & Co. KG, Oldenburg (36.3 million euros). With regard to loans, the majority of the investments are attributable to EWE NETZ, EWE GASSPEICHER GmbH, Oldenburg, EWE ERNEUERBARE ENERGIEN GmbH, Oldenburg, EWE Windpark Köhlen GmbH & Co. KG, Oldenburg, and EWE Windpark Hatten GmbH, Hatten. Loans to companies with which an investment relationship exists were issued to Trianel Windkraftwerk Borkum II GmbH & Co. KG, Oldenburg (34.7 million euros). Overall, the additions to loans to affiliated companies and nterests totalled 482.9 million euros in the reporting year. The additions as part of acquisitions of interests, capital increases and capital contributions amounted to 57.5 million euros.

T019

in millions of euros 31.12.2017 31.12.2016

Intangible assets 1 6.1 6.8

Land and buildings 2 3.6 3.1

Power supply systems

Other technical equipment and machinery 0.1 0.1

Furniture and office equipment 4.4 2.6

Financial assets 540.4 76.2

Total 554.6 88.8

1 of which 0.3 million euros (previous year: 2.7 million euros) in assets under construction

2 of which 0.6 million euros (previous year: 0.0 million euros) in assets under construction

The cash flow from operating activities was 8.7 million euros in the business year. At −136.9 million euros, the net income for the year on which the calculation was based was 240.8 mil-lion euros lower than in the previous year. Non-cash depreci-ation, amortisation and write-downs of 349.7 million euros, interest expenses (84.9 million euros), income tax expenses (83.1 million euros) and the changes in provisions and liabili-ties (75.1 million euros) increased the cash flow, whereas in-come from investments (406.3 million euros) and income tax payments (59.4 million euros) decreased it.

The positive cash flow from investing activities was determined by the sale of the shares in VNG in the previous year. In 2017, the net total of the addition and disposal of financial assets was −163.0 million euros. Investments in intangible assets and property, plant and equipment were merely negligible. Incom-ing payments from dividends or profit transfers from financial investments (406.3 million euros) led to a positive cash flow overall. This income was higher than in the previous year.

The cash flow from financing activities largely reflects the as-sumption of loans and the issuance of bonds (365.2 million euros), as well as the retirement of bonds and repayment of loans (214.0 million euros), and the payment of the dividend of 88.0 million euros in the previous year.

Cash and cash equivalents represent liquid assets and in-creased by 237.6 million euros to 509.4 million euros.

The company was always capable of fulfilling its financial obligations.

T018

Financial positionin millions of euros 2017 2016

Cash flow from operating activities 8.7 −64.5

Cash flow from investing activities 237.5 1,246.2

Cash flow from financing activities −8.6 −1,132.2

Changes to cash and cash equivalents 237.6 49.5

Current situation of EWE AG C O M B I N E D M A N AG E M E N T R E P O R T 59

Forward-looking statements

All statements made are based on current knowledge and assumptions. They represent estimates that we have formu-lated on the basis of all information available to us at the pres-ent time. In the event that the underlying assumptions do not occur or additional risks develop, actual results could deviate from expected results. As such, we cannot assume liability for these statements.

Oldenburg, Germany, 19 February 2018

The Board of Management

Stefan Dohler

Michael Heidkamp

Wolfgang Mücher

Forecast deviations

EWE AG unexpectedly generated an annual deficit of 136.9 mil-lion euros for the 2017 business year. This was due to the write-down of the carrying amount of the interest in swb AG of 349.2 million euros.

Expected development of EWE AG

Due to its position as the Group’s parent company, EWE AG’s net income for the year is heavily influenced by income from financial assets. No write-downs of interests – as took place in the previous year – are expected in 2018. Instead, we expect tens of millions of euros in income from the disposal of inter-ests. This will cause the income from investments to increase significantly. Nevertheless, earnings from energy sales, tele-communications and grids remain under constant price pressure and are facing regulation and changes in charges. Non-recurring special items notwithstanding and following an annual deficit in the reporting year, the company expects a net annual profit of hundreds of millions of euros, higher than in 2016, for the following business year.

Report pursuant to Section 312 of the German Stock Corporation Act

Pursuant to Section 312 of the German Stock Corporation Act (AktG), EWE AG has prepared a report on its relationship with affiliated companies. This report closes with the following statement by the Board of Management:

‘In the transactions specified in the report on EWE AG’s rela-tionship with affiliated companies, our company – based on the circumstances we were aware of at the time the transac-tions were carried out – received fair compensation in each transaction.’

Excerpt of the consolidated financial statements

Consolidated financial statements of the EWE Aktiengesellschaft

62 Consolidated income statement of the EWE Group63 Consolidated statement of comprehensive income of the EWE Group64 Statement of financial position of the EWE Group66 Statement of changes in equity of the EWE Group68 Cash flow statement of the EWE Group

62

This report contains a condensed version of the EWE Group consolidated financial statements. The full report is available on our website: www.ewe.com/en/investor-relations/publications/annual-reports

62 C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S Consolidated income statement of the EWE Group

T020

in millions of euros Notes 2017 2016

Revenue 5 8,654.9 7,936.2

Electricity and energy taxes −404.4 −369.9

Revenue (excluding electricity and energy taxes) 8,250.5 7,566.3

Inventory changes 5.7 −1.5

Internally produced and capitalised assets 6 68.2 62.4

Other operating income 7 317.1 435.4

Material expenses 8 −6,333.7 −5,761.7

Personnel expenses 9 −711.8 −722.5

Depreciation, amortisation and write-downs 10 −558.9 −605.8

Other operating expenses 11 −560.8 −577.9

Impairment losses / income pursuant to IFRS 9.5.5 12 −16.1

Profit / loss from financial assets accounted for using the equity method 13 −8.5 −0.7

Other income from investments 14 52.1 255.2

EBIT 1 503.8 649.2

Interest income 15 16.2 13.0

Interest expenses 15 −158.7 −219.5

Earnings before income taxes 361.3 442.7

Income taxes 16 −105.2 −109.8

Earnings in the period 256.1 332.9


Shareholders of the parent company 254.9 331.9

Minority shares 1.2 1.0

256.1 332.9

1 Earnings before interest and taxes

Consolidated income statement of the EWE GroupFrom 1 January to 31 December 2017

Consolidated statement of comprehensive income of the EWE Group C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S 63

T021

in millions of euros Notes 2017 2016

Earnings in the period 256.1 332.9

Actuarial gains and losses from defined benefit pension plans and similar obligations 29 0.6 −183.5

Deferred taxes on pensions −0.1 49.2

Fair value measurement of equity instruments 9.5

Deferred taxes on equity instruments −0.1

Sum of other income and expenses recognised directly in equity without future reclassification to profit and loss 9.9 −134.3

Balancing item for foreign currency translation from international subsidiaries −18.8 −22.9

Cash flow hedges 40 −34.7 323.7

Deferred taxes on accruals for cash flow hedges 10.5 −91.8

Fair value of available-for-sale financial assets 37.7

Deferred taxes on accruals for available-for-sale financial assets 0.1

Share of other comprehensive income comprising financial assets accounted for using the equity method 20 3.9 −0.7

Sum of other income and expenses recognised directly in equity with future reclassification to profit and loss −39.1 246.1

Other income after taxes −29.2 111.8

Comprehensive income after taxes 226.9 444.7


Shareholders of the parent company 229.0 446.5

Minority shares −2.1 −1.8

226.9 444.7

Consolidated statement of comprehensive income of the EWE GroupFrom 1 January to 31 December 2017

64 C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S Statement of financial position of the EWE Group

T022

Assetsin millions of euros Notes 31.12.2017 31.12.2016

Non-current assets

Intangible assets 17 842.2 868.7

Property, plant and equipment 18 4,929.1 4,926.6

Investment property 19 6.3 5.4

Financial assets accounted for using the equity method 20 145.0 123.0

Other financial assets 21 605.1 526.7

Income tax refund claims 35 1.8 1.9

Other non-financial assets 80.2 10.1

Deferred taxes 35 42.7 32.4

6,652.4 6,494.8

Current assets

Inventories 22 203.2 204.3

Trade receivables 23 1,042.6 764.8

Other financial receivables and assets 24 496.7 470.3

Income tax refund claims 35 11.3 35.9

Other non-financial receivables and assets 25 82.6 113.8

Liquid assets 26 608.3 351.3

2,444.7 1,940.4

Total assets 9,097.1 8,435.2

Statement of financial position of the EWE GroupAs at 31 December 2017

Statement of financial position of the EWE Group C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S 65

T023

Equity and liabilitiesin millions of euros Notes 31.12.2017 31.12.2016

Equity 27

Subscribed capital 243.0 243.0

Less treasury shares −24.3 −24.3

Capital reserves 1,486.4 1,619.2

Less treasury shares −489.3 −489.3

Accumulated earnings 1,200.9 788.2

Accumulated other comprehensive income −356.6 −219.8

Equity attributable to the shareholders of the parent company 2,060.1 1,917.0

Minority shares 24.6 24.9

2,084.7 1,941.9

Non-current liabilities

Construction subsidies 28 657.6 675.9

Provisions 29 2,331.4 2,236.7

Bonds 30 1,340.6 1,237.4

Liabilities to financial institutions 31 345.4 130.7

Other financial liabilities 33 301.3 317.0

Income tax liabilities 35 25.0 30.4

Other non-financial liabilities 34 10.5 9.6

Deferred taxes 35 92.6 107.8

5,104.4 4,745.5

Current liabilities

Construction subsidies 28 50.5 50.6

Emission rights 14.2 14.0

Provisions 29 132.9 159.4

Bonds 30 19.1 168.2

Liabilities to financial institutions 31 118.1 76.4

Trade payables 32 902.6 598.1

Other financial liabilities 33 485.1 500.7

Income tax liabilities 35 47.1 63.6

Other non-financial liabilities 34 138.4 116.8

1,908.0 1,747.8

Total equity and liabilities 9,097.1 8,435.2

66 C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S Statement of changes in equity of the EWE Group

T024

Subscribedcapital

Capital reservesof the EWE Group

Accumulatedearnings Accumulated other comprehensive income Accumulated other comprehensive income

Equityattributable

to theshareholders of

the parentcompany

Minorityshares Equity

in millions of euros

Reserve for equity

instruments

Remeasurementreserve under

IFRS 3

Reservefor cash flow

hedges

Reserve foravailable-for-sale

financialinstruments

Currencytranslationdifference

Measurementof pension

obligations IFRS 5

Changes tomeasurements

using the equity method not

recognised inprofit and loss

As at 01.01.2016 218.7 1,138.7 684.5 74.5 −120.4 162.9 −86.7 −339.0 16.8 −25.7 1,724.3 24.9 1,749.2

Earnings in the period 331.9 331.9 1.0 332.9

Other earnings 231.9 37.8 −20.1 −134.3 −0.7 114.6 −2.8 111.8

Total earnings 446.5 −1.8 444.7

Capital decrease −8.8 −8.8 −8.8

Dividend payments −225.5 −225.5 −225.5

Other changes −2.7 −16.8 −19.5 1.8 −17.7

As at 31.12.2016 218.7 1,129.9 788.2 74.5 111.5 200.7 −106.8 −473.3 −26.4 1,917.0 24.9 1,941.9

Effects of initial application of IFRS 9 81.9 123.5 −200.7 4.7 4.7

As at 01.01.2017 218.7 1,129.9 870.1 123.5 74.5 111.5 −106.8 −473.3 −26.4 1,921.7 24.9 1,946.6


Other earnings 9.4 −24.2 −15.5 0.5 3.9 −25.9 −3.3 −29.2


Withdrawal from the capital reserves −132.8 132.8


Other changes 31.1 −33.7 −2.6 1.8 −0.8

As at 31.12.2017 218.7 997.1 1,200.9 132.9 74.5 53.6 −122.3 −472.8 −22.5 2,060.1 24.6 2,084.7

Statement of changes in equity of the EWE GroupFrom 1 January to 31 December 2017

Statement of changes in equity of the EWE Group C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S 67

T024

Subscribedcapital

Capital reservesof the EWE Group

Accumulatedearnings Accumulated other comprehensive income Accumulated other comprehensive income

Equityattributable

to theshareholders of

the parentcompany

Minorityshares Equity

in millions of euros

Reserve for equity

instruments

Remeasurementreserve under

IFRS 3

Reservefor cash flow

hedges

Reserve foravailable-for-sale

financialinstruments

Currencytranslationdifference

Measurementof pension

obligations IFRS 5

Changes tomeasurements

using the equity method not

recognised inprofit and loss

As at 01.01.2016 218.7 1,138.7 684.5 74.5 −120.4 162.9 −86.7 −339.0 16.8 −25.7 1,724.3 24.9 1,749.2


Other earnings 231.9 37.8 −20.1 −134.3 −0.7 114.6 −2.8 111.8


Capital decrease −8.8 −8.8 −8.8


Other changes −2.7 −16.8 −19.5 1.8 −17.7

As at 31.12.2016 218.7 1,129.9 788.2 74.5 111.5 200.7 −106.8 −473.3 −26.4 1,917.0 24.9 1,941.9

Effects of initial application of IFRS 9 81.9 123.5 −200.7 4.7 4.7

As at 01.01.2017 218.7 1,129.9 870.1 123.5 74.5 111.5 −106.8 −473.3 −26.4 1,921.7 24.9 1,946.6


Other earnings 9.4 −24.2 −15.5 0.5 3.9 −25.9 −3.3 −29.2


Withdrawal from the capital reserves −132.8 132.8


Other changes 31.1 −33.7 −2.6 1.8 −0.8

As at 31.12.2017 218.7 997.1 1,200.9 132.9 74.5 53.6 −122.3 −472.8 −22.5 2,060.1 24.6 2,084.7

68 C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S Cash flow statement of the EWE Group

T025

in millions of eurosSee notes, Section 44 2017 2016

EBIT 1 503.8 649.2

Depreciation, amortisation and write-downs 566.9 610.2

Reversals of write-downs −60.3 −0.8

Release of construction subsidies −58.6 −59.9

Interest paid −86.0 −150.9

Interest received 16.1 12.8

Income tax payments / refunds −130.8 −125.3

Profit / loss from the divestiture of fixed assets 3.1 −219.6

Non-cash foreign currency gains / losses −0.1

Non-cash changes to the value of accruals 57.3 33.7

Changes to valuations using the equity method recognised in profit and loss 9.2 1.9

Non-cash profit / loss from financial derivatives −19.6 −86.0

Other non-cash expenses and income −27.2 0.9

Changes in inventories −29.9 10.7

Changes in receivables and other assets −278.6 −19.4

Changes in liabilities 190.4 −185.7

Cash flow from operating activities 655.8 471.7

Incoming payments from construction subsidies 50.6 49.9

Incoming payments from the divestiture of intangible assets 0.6

Payments for investments in intangible fixed assets −42.9 −43.5

Incoming payments from the divestiture of fixed assets 10.6 15.0

Payments for investments in fixed assets −344.4 −373.3

Incoming payments from the divestiture of other non-current assets 17.6 975.1

Payments for investments in other non-current assets −122.5 −38.2

Payments for investments in shares in fully consolidated companies −15.8 −14.2

Cash flow from investing activities −446.2 570.8

Disbursements to owners of the parent company (dividends) −88.0 −225.5

Incoming payments from the acquisition of financial liabilities 378.8 7.5

Payments from the repayment of financial liabilities −225.2 −815.2

Other net payments from financing activities −8.9

Cash flow from financing activities 56.7 −1,033.2

Change in cash and cash equivalents 266.3 9.3

Changes in cash and cash equivalents due to exchange rates and the basis of consolidation −9.0 −9.4

Cash and cash equivalents at the beginning of the period 352.2 352.3

Cash and cash equivalents at the end of the period 609.5 352.2

1 Earnings before interest and taxes

Cash flow statement of the EWE Group1 January to 31 December 2017 Source (+) and application (−) of fund

Indizes / Lists

80 GRI content index84 List of abbreviations85 Index86 Imprint , Financial calendar, Disclaimer

87 EWE Group five-year overview

80

71Independent auditor’s reports

71 Responsibility statement72 Independent auditor’s report78 Independent auditor’s limited

assurance report

70About this report

More information

70 M O R E I N F O R M AT I O N

About this report

This integrated report by EWE AG combines our financial and sustainability reports and in doing so, shows how financial and non-financial value drivers contribute to the success of our company.

EWE AG’s consolidated financial statements were prepared in accordance with the mandatory International Financial Reporting Standards (IFRS) and interpretations of the IFRS Interpretations Committee (IFRS IC) as at 31 December 2017, in so far as they have been adopted by the European Union. Further applicable legal provisions set forth in the German Commercial Code (HGB) have also been adhered to.

As before, our reporting on sustainability is based on the spec-ifications of the Global Reporting Initiative. In the 2017 busi-ness year, it was based on the specifications of the GRI Stand-ard for the first time. GRI 102-48

As our reporting is already integrated, we have included the non-financial statement under CSR-RUG in the non-financial Section of our report.

The non-financial statements of the Group and EWE AG, the parent company, are submitted together. The report will indi-cate if certain non-financial aspects are treated differently between the Group and the individual company. GRI 102-45

An index for the non-financial statement pursuant to CSR-RUG shows at a glance where the legally required disclosures can be found in the integrated report. The index also specifies the corresponding key aspects of EWE with regard to the aspects set out by law.

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft was engaged to audit the consolidated financial statements, com-bined management report and the content of the non- financial statement and provide an opinion.

The non-financial statement for the 2017 business year was subjected to a limited assurance audit. The non-financial state-ment, the full consolidated financial statements and the combined management report for the 2017 business year are available at https://www.ewe.com/en/investor-relations/ publications/annual-reports.

T026

CSR-RUG aspect Key aspect (EWE) Section of report

Business ModelCombined Management Report, Business

Conditions and General Framework

Environmental Concerns Environmental Protection Our Resources, Environment

Employee Concerns

Working Conditions

Health Management and Occupational Safety

Education and Advanced Training Our Resources, Employees

Social Aspects

Security of Supply and Network Stability

Customer Satisfaction and Service Quality

Information Security

Economic Responsibility

Our Resources, Plants and Networks

Our Resources, Social Aspects and Relationships

Our Resources, Social Aspects and Relationships

Our Resources, Finance

Observation of Human Rights

The aspect of observing human rights was taken into account in the materiality analysis

and not identified as a key reporting aspect in the sense of the German Corporate

Social Responsibility Directive Implementation Act (CSR-RUG). Responsible Management

Bribery and Corruption Corruption Prevention Responsible Management

http://www.ewe.com/en/investor-relations/publications/annual-reports


M O R E I N F O R M AT I O N 71

Responsibility statement

To the best of our knowledge, and in accordance with the ap-plicable reporting principles, the consolidated financial state-ments give a true and fair view of the EWE Group’s net assets, financial position and results of operations, and the EWE Group’s management report includes a fair review of the trends and performance of the business and the position of the EWE Group as well as a description of the principal oppor-tunities and risks associated with the EWE Group’s expect-ed performance.

Oldenburg, 19 February 2018

The Board of Management

Stefan Dohler

Michael Heidkamp

Wolfgang Mücher


Independent auditor’s report

Certificate of the audit of the consolidated financial statements and Group management report

to EWE Aktiengesellschaft

OpinionWe have audited the consolidated financial statements of EWE Aktiengesellschaft, Oldenburg, and its subsidiaries (the Group), consisting of the consolidated statement of financial position as at 31 December 2017, the consolidated statement of com-prehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the busi-ness year from 1 January to 31 December 2017, as well as the notes to the consolidated financial statements, including a summary of significant accounting methods. We also audited the Group management report prepared by EWE Aktienge-sellschaft for the business year from 1 January to 31 Decem-ber 2017 and merged with the management report of the com-pany. In accordance with the statutory regulations in Germany, we did not audit the non-financial Group declaration or cor-porate governance declaration in the sub-section of the Group management report entitled ‘Proportion of Women’.

In our opinion, on the basis of the knowledge obtained in the audit,

■■ the accompanying consolidated financial statements are consistent with the IFRS as adopted by the EU and the sup-plementary statutory German regulations that are applic-able pursuant to Section 315e (1) HGB in all relevant aspects, and, with consideration for these regulations, provide an accurate representation of the net assets and financial position of the Group as at 31 December 2017 and of its results of operations for the business year from 1 January to 31 December 2017, and

■■ the accompanying Group management report as a whole provides an appropriate view of the Group’s position. In all material respects, this Group management report is con-sistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our audit opinion of the Group management report does not encompass the content of the aforementioned corporate governance declaration or the non-financial statement of the Group.

■■ Pursuant to Section 322 (2) line 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the Group management report.

Basis for the opinionsWe carried out our audit of the consolidated financial state-ments and Group management report in accordance with Sec-tion 317 HGB and Regulation (EU) No 537 / 2014 of the Euro-pean Parliament and of the Council, with consideration for the German Generally Accepted Standards on Auditing as prom-ulgated by the Institute of Public Auditors in Germany (IDW). Our responsibility under these regulations and standards is described in more detail in the section of our audit opinion entitled ‘Responsibilities of the auditor for the audit of the consolidated financial statements and Group management report’. We are independent of the Group entities in accord-ance with the requirements of European law and German com-mercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. Furthermore, pursuant to Article 10 (2) (f) of Regulation (EU) No 537 / 2014, we declare that we have not provided any non-audit services prohibited by Article 5 (1) of Regulation (EU) No 537 / 2014. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the Group management report.

Key audit matters in the audit of the consolidated financial statementsKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the business year from 1 January to 31 December 2017. These matters were addressed in the context of our audit of the consolidated financial state-ments as a whole, and in forming our opinion thereon; we do not provide a separate opinion on these matters.


Audit procedureDuring our audit, we analysed the process and accounting and measurement methods implemented by the Management of EWE Aktiengesellschaft to determine the fair value of cash- generating units and gained an understanding of the process stages and internal controls that were implemented.

We verified the consistency of the measurement methods im-plemented by the internal measurement guidelines with the relevant IFRS regulations as well as their implementation by EWE Aktiengesellschaft.

We analysed selected plans by comparing them with the ac-tual results generated in the past and with consideration for current developments. We understood the key assumptions regarding growth and the course of business by discussing them with the Management of EWE Aktiengesellschaft and verified the plausibility of the underlying long-term commod-ity and energy price forecasts. We evaluated their suitability on this basis. Furthermore, we audited the sensitivity analyses carried out by the company in order to estimate impairment risks in the event of a potential change in a key assumption on which the measurement was based.

The suitability of the other key measurement assumptions such as the discount rate and growth rate were audited with the support of internal measurement specialists and on the basis of a market indicator analysis. Furthermore, we verified the mathematical correctness of the measurement models.

Our audit has not led to any reservations with regard to the determination of fair value.

Reference to related disclosuresThe disclosures of the company regarding goodwill can be found in the notes to the consolidated financial statements in the Section ‘Notes to the Statement of Financial Position’ in Section 17 ‘Intangible Assets’. Further disclosures regarding energy-generating assets can be found in the notes to the con-solidated financial statements in the Section ‘Notes to the Statement of Financial Position’ in Section 18 ‘Property, Plant and Equipment’ and in Section 10 ‘Depreciation, Amortisation and Write-downs’ in the Section ‘Notes to the Statement of Profit and Loss’.

We describe what we consider to be key audit matters below:

1. Impairment of cash-generating units with goodwill and certain energy-generating assetsReasons for specification as a key audit matterIn the consolidated financial statements of EWE Aktiengesell-schaft, key goodwill is recognised in the line item ‘Intangible assets’ and key energy-generating assets are recognised in the line item ‘Property, plant and equipment’. In order to deter-mine any need for impairment, goodwill undergoes an annual or event-based impairment test and property, plant and equip-ment undergoes an event-based impairment test on the level of the cash-generating units to which the goodwill and / or property, plant and equipment in question has been allocat-ed. In particular, cash-generating units with certain energy- generating assets include offshore wind farms and conven-tional generation.

For the purposes of the impairment test, the fair value less costs of disposal is determined on the basis of the present val-ue of the future cash flows resulting from the budgets for the next three years (medium-term planning) or a longer period determined by the company that have been prepared by the Management and approved or recognised by the Supervisory Board. In this context, expectations regarding future market developments, including changes in certain energy prices and country-specific assumptions regarding changes in macro-economic parameters, are taken into consideration. Present values are determined using discounted cash flow methods. Discounting is carried out on the basis of the weighted average cost of capital of each cash-generating unit. The result of these measurements is largely dependent on the estimation of future cash flows and the discount rates used by the Management.

In light of the material significance, the complexity of the measurement models and the discretionary assumptions of the Management, we consider the determination of fair value as part of the impairment test a key audit matter.


Audit procedureDuring our audit, we also audited the suitability and effective-ness of the internal control system for estimating and contin-uously accounting for revenue. With regard to the estimated proceeds, our audit entailed various analytical examinations and data analyses using actual data in order to test the plau-sibility of the turnover estimates of EWE Aktiengesellchaft. Furthermore, we audited the consistency and continuity of the applied estimate procedures for determining consumption demarcation and examined the suitability of the estimates of the previous year by comparing them against actual state-ments from the year.

We also analysed the estimated sales quantities used by the Group, including the underlying estimation parameters such as degree day statistics, and in doing so carried out a compar-ison of the recognised accrued / deferred quantities against the actual quantities. Plausibility checks using actual values as at the reporting date were carried out for key commercial customers using random samples.

Our audit has not led to any reservations with regard to the accrual / deferral of receivables from customers and the related revenue.

Reference to related disclosuresThe disclosures concerning proceeds from energy deliveries can be found in the notes to the consolidated financial statements in the Section ‘Notes to the Statement of Profit and Loss’ in Section 5 ‘Revenue’ and in the Section ‘Notes to the Statement of Financial Position’ in section 43 ‘Segment Reporting’.

3. Provisions for obligations from rehabilitation and decon-struction (especially of underground gas storage facilities and wind farms)Reasons for specification as a key audit matterThe consolidated financial statements of EWE Aktienge-sellschaft contain significant provisions for obligations from rehabilitation and deconstruction in order to meet the obliga-tions of the company, as an operator of underground gas stor-age facilities, wind farms and power plants, to abandon and demolish them upon the termination of its operations and im-plement necessary rehabilitation measures. In some cases, the exact scope has not yet been specified under public or private law. The obligation is measured using the discounted settle-ment amount as at the reporting date. In order to determine the settlement amount, the expected disbursements at prices as at the reporting date are first inflated in order to factor in future cost increases and then discounted at a rate specific to

2. Accrual accounting of proceeds from electricity and gas sales (demarcation of consumption)Reasons for specification as a key audit matterIn the consolidated financial statements of EWE Aktienge-sellschaft, some revenue is estimated for energy deliveries (elec-tricity marketing and distribution, gas marketing and distribu-tion and the billing of electricity received from renewables).

In the EWE Group, the total sales are determined through measurement, reading and estimation. In this regard, the pro-cedures differ due to state standards, technical measurement methods and time-based processes. The EWE Group applies accrual accounting for customers in Germany whose consump-tion cannot be read and billed as at the reporting date. The accrual accounting method is applied monthly on a rolling ba-sis. The turnover estimates concern the energy deliveries per customer between the date of the last meter reading and the end of the year, as well as an allocation of the actual measured delivered quantity to the period since the previous measure-ment. The total volumes supplied represent the output varia-ble. Network losses and metered quantities for which readings have been taken at the supply points – and have been billed as part of the monthly billing process – are deducted from these volumes. The remaining quantity serves as the basis for the statistical quantity of customers from whom readings are tak-en as part of the annual billing process. These quantities are allocated and evaluated in line with assumptions regarding customer habits and historical consumption data / profiles of the customer. Statistics regarding customer requirements and revenue from customers who are billed annually are checked and, if necessary, updated during the next meter reading and billing processes in the following year. For off-grid customers, the EWE Group forms expectations regarding their consump-tion. Customers pay instalments periodically towards the expected consumption. For each current month, the total quantity and customers who are billed monthly are on the basis of some forecasts for the sake of urgent calculation. Any necessary adjustments are made in the following month. In light of the material significance of the recognised revenue and deferred receivables, the complexity of the estimation models and the discretionary assumptions of the Management used as part of the estimation procedure, we consider the de-termination of the deferred receivables including the related revenue a key audit matter.


Other informationThe Supervisory Board is responsible for the ‘Report of the Supervisory Board of EWE Aktiengesellschaft’. Otherwise, Management is responsible for the other information. The oth-er information comprises the non-financial Group declaration in Section 3 of the Group management report, the corporate governance declaration in the sub-section of the Group man-agement report entitled ‘Proportion of Women’ and other components intended for the annual report of which we re-ceived copies prior to the provision of this audit opinion, es-pecially the responsibility statement. Furthermore, the other information comprises the other components of the annual report that are likely to be provided to us after we award the audit opinion, especially the report of the Supervisory Board pursuant to Section 171 (2) AktG.

Our opinions on the consolidated financial statements and on the Group management report do not cover the other infor-mation, and consequently we do not express an opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, consider whether the oth-er information

■■ is materially inconsistent with the consolidated financial statements, with the Group management report or our knowledge obtained in the audit, or

■■ otherwise appears to be materially misstated.

Responsibilities of Management and the Supervisory Board for the consolidated financial statements and the Group management reportManagement is responsible for the preparation of the consoli-dated financial statements that comply, in all material re-spects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec-tion 315e (1) HGB and that the consolidated financial state-ments, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and results of operations of the Group. In addition, management is re-sponsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, manage-ment is responsible for assessing the Group’s ability to con-tinue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on

the liability and its term. Especially in order to evaluate geo-logical particularities with regard to underground gas storage facilities, the determination of the settlement amount is also based on external appraisals and information from the facility managers. The assumptions of the Management – as to the scope of the public or private obligations, the geological par-ticularities, the rehabilitation methods, the estimated remain-ing time until rehabilitation or demolition and the future cost increases and discount rate – used to calculate the provisions for obligations from rehabilitation and deconstruction are based on discretionary judgement.

In light of the material significance, the complexity of the meas-urement models and the discretionary assumptions of the Man-agement, we consider the calculation of the provisions for ob-ligations from rehabilitation and deconstruction a key audit matter.

Audit procedureDuring our audit, we analysed the process and accounting and measurement methods implemented by the Management of EWE Aktiengesellschaft to determine the provisions for obli-gations from rehabilitation and deconstruction and gained an understanding of the process stages and internal controls that were implemented.

We verified the consistency of the measurement methods im-plemented by the internal measurement guidelines with the relevant IFRS as well as their implementation by the Manage-ment of EWE Aktiengesellschaft.

The suitability of the other significant measurement assump-tions such as expected costs and rehabilitation methods have also been examined with the support of external experts of the company. Furthermore, we verified the mathematical cor-rectness of the measurement models.

Our audit has not led to any reservations with regard to the determination of fair value.

Reference to related disclosuresThe disclosures of the company regarding the provisions for obligations from rehabilitation and deconstruction can be found in the notes to the consolidated financial statements in the section ‘Notes to the statement of financial position’ in section 29 ‘Provisions’.


We exercise professional judgement and maintain profession-al scepticism throughout the audit. We also:

■■ Identify and assess the risks of material misstatement of the consolidated financial statements and of the combined management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

■■ Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of ar-rangements and measures (systems) relevant to the audit of the combined management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effec-tiveness of these systems.

■■ Evaluate the appropriateness of accounting policies used by management and the reasonableness of estimates made by management and related disclosures.

■■ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signif-icant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial state-ments and in the combined management report or, if such disclosures are inadequate, to modify our respective opin-ions. Our conclusions are based on the audit evidence ob-tained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern.

■■ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo-sures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group in compliance with IFRSs as adopt-ed by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB.

the going concern basis of accounting unless there is an inten-tion to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, management is responsible for the preparation of the combined management report that, as a whole, pro-vides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrangements and measures (systems) as they have consid-ered necessary to enable the preparation of a combined man-agement report that is in accordance with the applicable Ger-man legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the combined man-agement report.

The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and of the Group manage-ment report.

Responsibilities of the auditor for the audit of the consolidated financial statements and Group management reportOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or er-ror, and whether the combined management report as a whole provides an appropriate view of the Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropri-ately presents the opportunities and risks of future develop-ment, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and on the combined management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstate-ments can arise from fraud or error and are considered mate-rial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this combined management report.


Other legal and regulatory requirementsFurther information pursuant to Article 10 of Regulation (EU) No 537/2014We were elected as Group auditor by the annual general meet-ing on 16 May 2017. We were engaged by the Supervisory Board on 26 June 2017 / 19 December 2017. We have been the Group auditor of EWE Aktiengesellschaft without interruption since the 2012 business year.

We declare that the opinions expressed in this auditor’s report are consistent with the additional report to the audit commit-tee pursuant to Article 11 of Regulation (EU) No 537/2014 (long-form audit report).

Public auditor responsible for the engagementThe public auditor responsible for the audit is Mr Olaf Boelsems.

Hamburg, 19 February 2018

Ernst & Young GmbHWirtschaftsprüfungsgesellschaft

Boelsems EickhoffAuditor Auditor

■■ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express opinions on the consolidated financial statements and on the combined management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely re-sponsible for our opinions;

■■ Evaluate the consistency of the combined management re-port with the consolidated financial statements, its conform-ity with German law, and the view of the Group’s position it provides;

■■ Perform audit procedures on the prospective information presented by management in the combined management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by management as a basis for the prospective information, and evaluate the proper derivation of the prospective in-formation from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoid-able risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regard-ing, among other matters, the planned scope and timing of the audit and significant audit findings, including any signifi-cant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a state-ment that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards.

From the matters communicated with those charged with gov-ernance, we determine those matters that were of most sig-nificance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter.


Independent auditor’s limited assurance report

The assurance engagement performed by Ernst & Young (EY) relates exclusively to the German version of the combined nonfinancial statement 2017 of EWE AG. The following text is a translation of the original German Independent Assurance Report.

To EWE AG, OldenburgWe have performed a limited assurance engagement on the group nonfinancial statement of EWE AG according to Sec-tion 315b of the German Commercial Code (HGB), which is combined with the nonfinancial statement of the parent com-pany according to Section 289b HGB, the disclosures are marked with the symbol NFS in the sustainability reporting as well as the Sections ‘Business Conditions and General Frame-work / The EWE Group’ and ‘Report on Risks and Opportuni-ties / Legal and Compliance Risks’ of the Group management report (here after: combined nonfinancial statement), for the reporting period from 1 January 2017 to 31 December 2017. Our engagement did not include any disclosures for prior years.

Management’s responsibilityThe legal representatives of the Company are responsible for the preparation of the combined nonfinancial statement in accordance with Sections 315c in conjunction with 289c to 289e HGB.

This responsibility includes the selection and application of appropriate methods to prepare the combined nonfinancial statement as well as making assumptions and estimates related to individual disclosures, which are reasonable in the circumstances. Furthermore, the legal representatives are responsible for such internal controls that they have consid-ered necessary to enable the preparation of a combined non-financial statement that is free from material misstatement, whether due to fraud or error.

Auditor’s declaration relating to independence and quality controlWe are independent from the entity in accordance with the provisions under German commercial law and professional requirements, and we have fulfilled our other professional responsibilities in accordance with these requirements.

Our audit firm applies the national statutory regulations and professional pronouncements for quality control, in particular the by-laws regulating the rights and duties of Wirtschafts-prüfer and vereidigte Buchprüfer in the exercise of their pro-fession [Berufssatzung für Wirtschaftsprüfer und vereidigte

Buchprüfer] as well as the IDW Standard on Quality Control 1: Requirements for Quality Control in audit firms [IDW Quali-tätssicherungsstandard 1: Anforderungen an die Qualitäts-sicherung in der Wirtschaftsprüferpraxis (IDW QS 1)].

Auditor’s responsibilityOur responsibility is to express a limited assurance conclusion on the combined nonfinancial statement based on the assur-ance engagement we have performed.

We conducted our assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised): Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board (IAASB). This Standard requires that we plan and perform the assur-ance engagement to obtain limited assurance about whether the combined nonfinancial statement of the Company has been prepared, in all material respects, in accordance with Sections 315c in conjunction with 289c to 289e HGB. In a lim-ited assurance engagement the assurance procedures are less in extent than for a reasonable assurance engagement and therefore a substantially lower level of assurance is obtained. The assurance procedures selected depend on the auditor's professional judgment.

Within the scope of our assurance engagement, which has been conducted primarily between January and February 2018, we performed amongst others the following assurance and other procedures:

■■ Inquiries of employees regarding the selection of topics for the combined nonfinancial statement, the risk assessment and the concepts of EWE AG for the topics that have been identified as material,

■■ Inquiries of employees responsible for data capture and consolidation as well as the preparation of the combined nonfinancial statement, to evaluate the reporting pro-cesses, the data capture and compilation methods as well as internal controls to the extent relevant for the assurance of the combined nonfinancial statement,

■■ Inspection of relevant documentation of the systems and processes for compiling, analyzing and aggregating data in the relevant areas, e.g. environment and employees in the reporting period and testing such documentation on a sam-ple basis,


parties in the context of this engagement (see attachment). In addition, please refer to the liability provisions contained there in no. 9 and to the exclusion of liability towards third parties. We assume no responsibility, liability or other obliga-tions towards third parties unless we have concluded a written agreement to the contrary with the respective third party or liability cannot effectively be precluded.

We make express reference to the fact that we do not update the assurance report to reflect events or circumstances arising after it was issued unless required to do so by law. It is the sole responsibility of anyone taking note of the result of our assur-ance engagement summarized in this assurance report to de-cide whether and in what way this result is useful or suitable for their purposes and to supplement, verify or update it by means of their own review procedures.

Munich, 26 February 2018

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Nicole Richter Jan Kaiser (German Public Auditor) (German Public Auditor)

■■ Inquiries and inspection of documents on a sample basis relating to the collection and reporting of selected data,

■■ Analytical procedures at group level regarding the quality of the reported data,

■■ Evaluation of the presentation of disclosures in the combined nonfinancial statement.

Assurance conclusionBased on our assurance procedures performed and assurance evidence obtained, nothing has come to our attention that causes us to believe that the combined nonfinancial statement of EWE AG for the period from 1 January 2017 to 31 December 2017 has not been prepared, in all material respects, in accord-ance with Sections 315c in conjunction with 289c to 289e HGB.

Intended use of the assurance reportWe issue this report on the basis of the engagement agreed with EWE AG. The assurance engagement has been performed for the purposes of the Company and the report is solely in-tended to inform the Company as to the results of the assur-ance engagement and must not be used for purposes other than those intended. The report is not intended to provide third parties with support in making (financial) decisions.

Engagement terms and liabilityThe “General Engagement Terms for Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften [German Public Auditors and Public Audit Firms]” dated 1 January 2017 are applicable to this engagement and also govern our relations with third


GRI content index

The report was submitted for the GRI Materiality Disclosures Service. The GRI has confirmed the correctness of the position of the GRI disclosures GRI 102-40 to GRI 102-49. Page refer-ences refer to the full version of the integrated report 2017 which can be downloaded as PDF from www.ewe.com/en/ investor-relations/publications/annual-reports

T027

GRI 101: Foundation 2016

GRI 102: General Disclosures 2016

Organisational profile

102-1 Name of the organisation EWE AG

102-2 Activities, brands, products and services U2: Cover 1 and 2

102-3 Location of headquarters Oldenburg

102-4 Location of operations U2: Cover 1

102-5 Ownership and legal form U2: Cover 2

102-6 Markets served U2: Cover 1 and 2

102-7 Scale of the organisation U2, U2: Cover 1 and 2, 64–65

102-8 Information on employees and other workers

Data for the entire Group has not yet been processed and thus cannot be presented for this reporting year. We are striving to make

this information available in full again for next year.

102-9 Supply chain27, see AR 2016: 28

https://report.ewe.com/pdfs/EWE-IR16-Full-Version.pdf

102-10 Significant changes to the organisation and its supply chain 6–7: There were no significant changes in the 2017 reporting year.

102-11 Precautionary principle or approach 14–15, 51–52

102-12 External initiativessee AR 2016: 33


102-13 Membership of associationssee AR 2016: 33


Strategy

102-14 Statement from the senior decision-maker 2–5

Ethics and integrity

102-16 Values, principles, standards and norms of behaviour 15

Governance

102-18 Governance structure 6–7, 12

Stakeholder engagement

102-40 List of stakeholder groups 12

102-41 Collective bargaining agreements

639 employees, or 93.4 per cent of the employees of EWE AG, are currently involved in collective bargaining. The data for the Group

as a whole are not currently being compiled. We aim to return to comprehensive reporting for this indicator next year.

102-42 Identifying and selecting stakeholderssee AR 2016: 32


102-43 Approach to stakeholder engagementsee AR 2016: 33


102-44 Key topics and concerns raised 13




Reporting practice

102-45 Entities included in the consolidated financial statements 11, 159

102-46 Defining report content and topic boundaries 12–13

102-47 List of material topics 13

102-48 Restatements of information 159: There has been no restatement

102-49 Changes in reporting 11

102-50 Reporting period 11, 159

102-51 Date of most recent report 26.04.18

102-52 Reporting cycle Annual

102-53 Contact points for questions regarding the report Legal notice

102-54 Claims of reporting in accordance with the GRI StandardsThis report has been prepared in accordance with

the GRI Standards: Core option

102-55 GRI content index 160–163

102-56 External assurance 151, 157, 159

Key issues

GRI 200: Economic 2016

Economic performance

GRI 103: Management approach 2016 103-1 / 2 / 3Material topics, management approach

and evaluation of the management approach 28

GRI 201: Direct economic value 2016 201-1 Direct economic value generated and distributed 29

Procurement practices



GRI 204: Proportion of spending 2016 204-1 Proportion of spending on local suppliers 27

Anti-corruption


and evaluation of the management approach 15–16

GRI 2015: Anti-corruption policies 2016 205-2Communication and training about

anti-corruption policies and procedures 16


GRI 300: Environment 2016

Energy



GRI 302: Energy 2016 302-4 Reduction of energy consumption 19

Emissions



GRI 305: Emissions 2016 305-4 GHG emissions intensity 18

GRI 305: Emissions 2016 305-5 Reduction of GHG emissions 18

Biodiversity



GRI 304: Biodiversity 2016 304-2Significant impacts of activities,

products, and services on biodiversity 19

Supplier environmental assessment


and evaluation of the management approach 15, 27

GRI 308: Supplier environmental assessment 2016 308-1

New suppliers that were screened using environmental criteria

27: Data for the entire Group has not yet been collected

and thus cannot be presented for this reporting year.


GRI 400: Social standards 2016

Employment



GRI 401: Employment 2016 401-1 New employee hires and employee turnover

22: Data for the entire Group has only been processed in part and thus cannot be

presented in full for this reporting year. We are striving to make this information

available in full again for next year.

Occupational health and safety



GRI 403: Occupational health and safety 2016 403-2

Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

24: Data for the entire Group has only been processed in part and thus cannot be

presented in full for this reporting year. We are striving to make this information


Training and education


and evaluation of the management approach 23, 45–46

GRI 404: Training and education 2016 404-2Programmes for upgrading employee skills and

transition assistance programmes 23

Diversity and equal opportunities



GRI 405: Diversity and equal opportunities 2016 405-1 Diversity of governance bodies and employees

Data for the entire Group has not yet been processed and thus cannot be

presented for this reporting year. We are striving to make this information


Supplier social assessment



GRI 414: Supplier social assessment 2016 414-1 New suppliers that were screened using social criteria

27: Data for the entire Group has not yet been collected and thus cannot be presented for this reporting year.

Socioeconomic compliance


and evaluation of the management approach 15 f., 27

GRI 419: Socioeconomic compliance 2016 419-1

Non-compliance with laws and regulations in the social and economic area




Customer privacy



GRI 418: Customer privacy 2016 418-1

Substantiated complaints regarding concerning breaches of customer privacy

and losses of customer data





List of abbreviations

AfS Available-for-SaleAGEB Working Group for Energy Balances

(Arbeitsgemeinschaft Energiebilanzen e. V.)AktG German Stock Corporation Act

(Aktiengesetz)BDEW German Association of Energy and Water Industries

(Bundesverband der Energie- und Wasserwirtschaft)BMWi Bundeswirtschaftsministeriumbp Base points (Basispunkte)BSA Broadband Service AnalyzerCER future contracts Certified Emission ReductionCO2 Carbon dioxideCVA Credit Value AdjustmentDBO Defined Benefit ObligationDRV “German framework agreement for financial futures

(Deutscher Rahmenvertrag für Finanzter-mingeschäfte)”

DVA Debit Value AdjustmentEBIT Earnings Before Interest and TaxesEBT Earnings Before TaxesEEG Renewable Energy Act

(Erneuerbare-Energien-Gesetz)EEW Energieverband Elbe-Weser Beteiligungsholding

GmbHEFET European Federation of Energy TradersEnBW AG EnBW Energie Baden-Württemberg AGEU European UnionEUA European Union AllowanceEWE TEL Group-owned Telecommunications CompanyEY Ernst & Young GmbH Wirtschaftsprüfungs-

gesellschaftFAHfT Financial Assets Held for TradingFLAC Financial Liabilities Measured at Amortised CostFLHfT Financial Liabilities Held for Trading

GKB Gemeinschaftskraftwerk Bremen GmbH & Co. KG

HGB German Commercial Code (Handelsgesetzbuch)

HVE Hansewasser Ver- und Entsorgungs-GmbHIAS International Accounting StandardsIASB International Accounting Standards BoardIDW German Institute of Public Auditors

(Institut der Wirtschaftsprüfer)IFRS International Financial Reporting StandardsIFRS IC IFRS Interpretations CommitteeIT Information TechnologykWh Kilowatt-hours (Kilowattstunden)KWKG Combined heat and power act

(Kraft-Wärme-Kopplungsgesetz)LaR Loans and ReceivablesMW Megawatts (Megawatt)MWh Megawatt-hour (Megawattstunde)NCG Net Connect GermanyPLN Polish złotyTDG Telekom Deutschland GmbHTRY Turkish liraTTF Title Transfer Facility (TTF Cal 16)USD US dollarVBL State insurance agency

(Versicherungsanstalt des Bundes und der Länder)

VNG AG Verbundnetz Gas AktiengesellschaftWACC Weighted Average Cost of CapitalWEE Weser-Ems-Energiebeteiligungen GmbH


Index

AAccounting methods U2, 72

Annual General Meeting 7

Appropriation of net profit 7

BBonds 65

CCash and cash equivalents 44, 58, 68

Cash flow 2, 5, 44, 58, 60, 63, 68

Cash flow hedges 63

Cash flow statement 60, 68

CO2 certificate 34

Compliance 16, 21, 78

DDeferred taxes 63, 64, 65

Derivative financial instruments 40, 42, 54

Derivatives 39, 41, 42

Discount rates 44

Dividend 67

EEBITDA, operating EBITDA 2, 5, U5

EBIT, operating EBIT U2, 3, 33, 39, 40, 41, 42, 43, 50, 51, 62, 68, U5

EBT 84

Employees 1, 2, 3, 4, 5, 12, 13, 22, 70

Equity 2, 5, 37, 43, 57, 65, 67

Equity method 17, 18, 32, 62, 63, 64, 67, 68

Equity ratio 2, 5

FFair value 39, 41, 42, 63

Financial instruments 54

Financial investments 58

Financial liabilities 65, 68, 84

Financial position 31, 44, 58

Financial risks 53

Financing 6, 33, 44, 56, 57, 58, 68

Forecast 30, 31, 39, 47, 59

GGoodwill 55,73

Guarantees 44, 48, 53, 86

H

Hedges 54, 63, 66

IImpairment losses 40, 62

Intangible assets 58, 64, 73

Inventories 64

LLeases 3

Legal and compliance risks 54

MMarket price risks 53

NNon-financial liabilities 65

Non-financial receivables 64

OOther income 40, 62, 63

PPension provision 39, 56

Personnel expenses 29, 40, 56, 62

RRating 33, 54

Renewable energy 35

Renewable energy sources act (EEG) 36

Research and development 33

Risks and opportunities 16, 21, 31, 51, 52, 53, 78

SSales 2, 4, 32, 33, 39, 41, 45, 50, 51

Segment reporting 33, 74

Strategy 21, 80

Subscribed capital 65

Subsidiaries 2, 11, 16, 32, 33, 55, 56, 63, 72

Supervisory Board 1, 6, 7, 12, 16, 46, 54, 55, 73, 75, 76, 77

TTransaction costs 47

Transparency 33, 47, 51

WWACC 84

Write-downs 33, 39, 40, 42, 56, 58, 59, 62, 68, 73


Financial calendar 2018

26.04.2018 Integrated report 2017 – Press conference of financial statements

28.08.2018 Interim report 2018

Disclaimer

This integrated report contains forward-looking statements based on assumptions and estimates by the management of EWE AG. Although company management believes that these assumptions and estimates are accurate, actual future devel-opments and results may differ considerably from these as-sumptions and estimates due to a wide variety of factors. These factors may include changes in the general economic situation, in the statutory and regulatory framework for Germany and the EU, and in the sector. EWE AG is neither liable for, nor guarantees that future developments and the actual results achieved in future will coincide with the assumptions and es-timates made in this Integrated Report. EWE AG neither in-tends nor assumes any obligation to update forward-looking statements to reflect events or developments after the date of this report. This document contains supplementary finan-cial performance indicators not described exactly in IFRS that are or can be non-GAAP measures. Isolated, these should not be used to assess the net assets, financial position and results of operations of the EWE Group, or as an alternative to the financial indicators calculated in line with IFRS and presented in the consolidated financial statements.

Other companies that present or report on financial perfor-mance indicators with a similar designation might calculate them differently.

Due to rounding, it is possible that certain figures in this and other documents do not add up to the exact reported total and that percentages do not exactly reflect the absolute val-ues to which they relate.

This integrated report also exists in German; in the event of any divergences, the German version of the Integrated Report takes precedence over the English version.

Both language versions are available to download from www.ewe.com

Imprint

Published byEWE AktiengesellschaftTirpitzstrasse 3926122 Oldenburg

Team editorial and textEWE AktiengesellschaftCorporate CommunicationPhone +49 (441) 4805-1830E-mail [email protected]

Wolfgang Witte, Aurich, Germany

Concept and DesignIR-ONE, Hamburg, Germany www.ir-one.de

PhotographyEWE archiveCarsten HeidmannMatthias IbelerStephan Meyer-Bergfeld

Printed byZertani Die Druck GmbH, Bremen, Germany

EWE on the Internetwww.ewe.com

EWE Group five-year overview

Key financial figures

in millions of euros 2017 2016 2015 2014 2013

Turnover 8,250.5 7,566.3 7,819.3 8,134.2 8,862.6

Operating EBITDA 937.4 969.9 864.0 847.1 983.2

Operating EBIT 503.4 534.6 428.1 425.4 497.9

EBIT 503.8 649.2 212.0 357.7 410.9

Earnings in the period 256.1 332.9 −9.4 146.3 57.2

Payments for investments (total) 525.6 472.2 666.9 721.3 573.5

Cash flow from operating activities 655.8 471.7 708.2 770.3 406.4

Total assets 9,097.1 8,435.2 9,744.3 9,800.9 10,370.4

Equity ratio in % 22.9 23.0 18.0 23.3 23.1

Net financial position 3,311.3 3,399.7 4,237.1 4,120.7 3,832.7

Employees (average) 9,134 9,048 8,855 9,154 9,163

Employees (full-time equivalent, FTE) 8,651 8,607 8,465 8,538 8,813

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26122 Oldenburg

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