Coal, Combined Cycle

RWE annual profits rise to €7.9bn

23 February 2007 – German multi-utility RWE Group continued to improve its earnings in 2006 compared with the previous year with an operating result increased by 14 per cent and recurrent net income up by 9 per cent.

The successful divestment of Thames Water resulted in a positive net financial position for the first time since 2001. The Group expects further significant income growth for 2007. Over the next five years, RWE plans to invest a total of up to €25bn ($32.8bn) billion.

RWE increased its operating result by 14 per cent to €6.1bn. This was driven by the Group’s positive operating performance, particularly in the area of power generation. Earnings were impacted negatively by German grid regulation and unscheduled power plant outages. EBITDA increased by 11 per cent to €7.9bn.

Recurrent net income, i.e. net income adjusted for one-off effects, is the key parameter for RWE’s dividend policy. In 2006, the Group increased recurrent net income by nine per cent to €2.5bn. Including all one-off effects, net income rose by 72 per cent to €3.9bn. Major non-operating one-off effects resulted for example from the divestment of Thames Water and changes in German tax legislation. As a result, earnings per share rose from € 3.97 to €6.84.

The RWE board is proposing a dividend of €3.5, double that of the preceding year.

During the next five years, RWE intends to invest a total of up to €25bn. Political framework conditions allowing, RWE will become Germany’s largest single private investor. In 2007, the Group intends to raise capital expenditure on property, plant and equipment in the energy business to a much higher level than was recorded in 2006. RWE plans the strongest growth in investment in the German power plant business. Expanding the gas business is another priority. Pipeline projects, new exploration as well as liquefied natural gas (LNG) activities will take centre stage.

The Group also plans to maintain its high level of investment in the continental European network and sales businesses. Some 80 per cent of spending on property, plant and equipment in this area has been earmarked for further modernization or expansion of electricity grids and gas networks. The Group intends to expand its power plant portfolio in the UK. The planned construction of a combined cycle gas turbine power plant with a generating capacity of up to 2000 MW is the most important project. Excluding the Water Division, the Group’s capital expenditure on property, plant and equipment for 2007 is expected to be in the order of Euro 4 billion.