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Interim Report 20141 January to 30 June

EWE Group key figures

EUR million 01.01. – 30.06.2014 01.01. – 30.06.2013 Change in %

Sales 4,148.0 4,662.1 -11.0

Operating EBITDA 393.4 628.6 -37.4

Operating EBIT 186.5 377.6 -50.6

EBIT 139.8 360.0 -61.2

Result for the period 18.2 169.1 -89.2

Cash paid for investments (total) 156.2 272.1 -42.6

Cash flow from operating activities 545.7 179.9 203.3

Balance sheet total 10,127.5 10,503.1 -3.6

Shareholders’ equity 2,333.4 2,498.9 -6.6

Capital employed 7,473.8 7,494.6 -0.3

Net financial position 3,671.7 3,874.7 -5.2

Equity ratio in % 23.0 23.8 -3.4

ROCE 1 in % 5.0 10.1 -50.5

Gearing ratio 2 4.7 3.1 51.6

Rating Baa1 (stable) Baa1 (negative)

Employees (average) 9,232 9,152 0.9

1 The return on capital employed (ROCE) compares the level of operating EBIT with the capital employed. In reporting cycles within the course of the year, the stock variable capital employed is linearised.

2 The gearing ratio compares the operating EBITDA with the net financial position. In reporting cycles within the course of the year, the stock variable net financial position is linearised.

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

Title pictureEWE conducts dialogue with people in the region. We are pushing forward the Ger-man energy turnaround by means of joint projects and innovative products. In the first half-year, the “Energy turnaround forum”, a series of events initiated by EWE, established an optimum platform for exchanging ideas and shaping the turnaround to-gether. Participants came up with numerous ideas, which are now being taken further.

Additional information can be found in the interim group management report beginning on page 8.

EWE Group structure

EWE GROUP*

CENTRAL DIVISIONS/ CONSOLIDATION

EWE AGswb AGEWE swb ISIS GmbHEWE IMMOBILIEN GmbHVNG – Verbundnetz Gas AG **

SALES AND TRADING

EWE VERTRIEB GmbHEWE TEL GmbHEWE TRADING GmbHswb Vertrieb Bremen GmbHswb Vertrieb Bremer haven GmbH & Co. KGswb Services GmbH & Co. KGhtp GmbH **

INTERNATIONAL AND IT

EWE Turkey Holding A. Ş.EWE Polska Sp. z o. o.BTC Business Technology Consulting AG

INFRASTRUCTURE

EWE NETZ GmbHEWE WASSER GmbHwesernetz Bremen GmbHwesernetz Bremerhaven GmbHGastransport Nord GmbHHansewasser Ver- und Entsorgung-GmbH **

GENERATION

EWE ERNEUERBARE ENERGIEN GmbHEWE Offshore Service & Solutions GmbHEWE GASSPEICHER GMBHswb Erzeugung GmbH & Co. KGswb CREA GmbHswb Entsorgung GmbH & Co. KGOffshore Windpark Riffgat GmbH & Co. KGDOTI Deutsche Offshore- Testfeld- und Infrastruk-tur-GmbH & Co. KG **Gemeinschafts kraftwerk Bremen GmbH & Co. KG **MVR Müllverwert ung Rugenberger Damm GmbH & Co. KG **

* Excerpt of the group organisational chart ** associated company

2 Letter from the Board of Management

6 Investor Relations

8 Interim group management report

9 Basic principles of the Group17 Current situation of the EWE Group22 Employees23 Supplementary report23 Risk report23 Outlook

25 Consolidated interim financial statements26 Income statement for the EWE Group27 Statement of comprehensive income for the

EWE Group28 Balance sheet for the EWE Group30 Statement of changes in shareholders’ equity

for the EWE Group32 Cash flow statement of the EWE Group33 Notes to the abridged interim consolidated

financial statements for EWE

47 Confirmation by the legal representatives

48 Certificate of auditors’ review

Contents

1

Letter from the Board of Management

As expected, in the first six months of 2014, we were unable to maintain last year’s highly positive figures for the development of our business. The unusually mild temperatures that prevailed last winter and this spring, then also placed additional pressure on our half-year result. This has led, after six months of the current year, to a year-on-year decrease of 50.6 per cent in our operating EBIT to its current level of € 186.5 million and to a decline of 89.2 per cent to € 18.2 million in the consolidated result for the period. The decline in earnings primarily arose in the heating market, as a result of unusual weather conditions. A reduction in electricity prices for our customers at the beginning of the year accentuated this effect still further. Despite the unusually mild weather in the first half of the year, we are confident we can achieve a satisfactory operating result as of year-end 2014 through the application of measures to improve results.

Temperature-related fluctuations in sales cannot be predicted and are therefore unavoid-able. They are a part of our business. We are convinced, however, that the multiplicity of measures we have initiated over the past two years to achieve reorientation on our mar-kets and improve our competitiveness are bearing fruit and will have a positive impact on consolidated earnings in 2014. Although these cannot compensate entirely for the current drop in our earnings, they ought to cushion the blow to an appreciable degree. Last year, for example, we started to dispose of shareholdings of minor strategic importance in the natural gas production sector. We are also pleased with the revenues that we are already generating from our capital expenditure in the offshore segment, particularly with the Riffgat offshore wind farm.

Despite our forward-looking position and approach, we as a company do not always re-spond to the changes in our markets with the agility that we would like, and our business processes continue to show potential for improvement. This is why we launched a pro-gramme at the beginning of the year to generate a further increase in our earning power. In the medium term, we are also going to reduce our costs with an extensive programme of measures; in the long term, structural and organisational optimisations will be imple-mented to improve efficiency. Furthermore, we intend to strengthen our “one company approach” in order to make even better use of the existing synergy potential. We believe that measurable successes will be achieved as early as the current financial year, which will help to strengthen the capital basis while preserving our financial leeway.

The fact that not all of the developments of significance for our business can be planned for, is shown this time by a highly gratifying example. In March 2014, an opportunity arose for us to acquire the stocks in VNG – Verbundnetz Gas AG held by our co-shareholder

EWE INTERIM REPORT 20142

The EWE AG Board of Management: Nikolaus Behr, Matthias Brückmann, Dr. Werner Brinker, Dr. Heiko Sanders, Dr. Torsten Köhne

3FOREWORD INVESTOR RELATIONS INTERIM GROUP MANAGEMENT REPORT CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Dr. Werner Brinker Matthias Brückmann

Dr. Torsten Köhne Dr. Heiko Sanders

Nikolaus Behr

Wintershall. VNG is a significant company for the German and European natural gas mar-ket. In the past, however, EWE’s freedom of action in this area was restricted. That is why we immediately seized the opportunity to play a more active structuring role at VNG. We now regard this new development first and foremost as a major responsibility for setting the course, in consultation with our partners, in such a way that VNG will be able to ex-ploit its commercial potential in an optimum manner in the future.

Dear Ladies and gentlemen, we have set ourselves demanding goals in the interests of our customers, employees and shareholders. Today we want to create a solid basis for EWE’s future sustainability. It is clear to see that given the very fundamental changes taking place in our markets, this cannot take place over few months and just with a series of short-term solutions. In the first six months of this financial year, the uncertainties of the energy busi-ness left a large dent in our earnings. To a certain extent, we can counter developments such as these by cutting our costs and improving efficiency, and we shall continue to do this with the utmost determination. And yet it is important to still understand that if we are to achieve the lasting improvements that we are striving for, even greater efforts will be necessary. With your support and your trust, we and all of the company’s employees are going to gallantly set about the task.

Yours sincerely,

Oldenburg, Germany, August 2014

Board of Management

EWE INTERIM REPORT 20144

Dr. Werner BrinkerChief Executive Officer Member of the Board, Infrastructure

Dr. Werner Brinker has been a member of the Board of Management at EWE AG since 1996, and has been Chief Executive Officer since 1998. He be-gan his career at EWE in 1978, where he was initially responsible for gas purchasing, before spending a number of years with other energy suppliers. He returned to EWE AG in 1996, join-ing the Board of Management with responsibility for technology.

Matthias BrückmannMember of the Board, Sales

Matthias Brückmann is on the Board of Management since 1 July 2013. Pri-or to joining EWE, Brückmann was a member of the board of MVV Energie AG. Before, he held management positions at MVV Energie AG, the BFE Institute for Energy and Environ -ment and the Enertec Energie und Technik GmbH.

Nikolaus BehrMember of the Board, Human Resources

Nikolaus Behr is on the Board of Man-agement of EWE AG since August 2012. He has held various managerial positions in the EWE Group’s Net-work and Controlling departments, and was most recently responsible for the commercial operations of EWE NETZ GmbH.

Dr. Torsten KöhneMember of the Board, Power Generation

Dr. Torsten Köhne is on the Board of Management since 2013. Dr. Torsten Köhne also chairs the Board of swb AG, on which he has been since 2005. Prior to joining swb, Dr. Köhne worked for a Bremen-based business law firm.

Dr. Heiko Sanders Member of the Board, Finance

Dr. Heiko Sanders is on the Board of Management since 2011. He worked in various leading positions for EWE. Most recently, he was a Member of the Board of Management of EWE ENERGIE AG. Before joining EWE he worked for an accountancy firm.


Investor Relations

EWE bonds and the capital market

EWE currently has four euro bonds outstanding on the capital market: in October 2004, the first two bonds were placed with terms of 10 and 15 years respectively and an aggregate volume of € 1.5 billion. In July 2009 and October 2011, EWE issued further euro bonds for € 500 million with maturities of twelve and nine years respectively. The bond issued in 2011 was part of a liability management transaction. The majority of the proceeds from the issue have been used to buy back the bond that is due to mature in 2014, so that the aggregate outstanding bond volume is currently € 2.14 billion.

The risk premium for European corporate bonds devel-oped positively in the first half of 2014. The European Central Bank’s persistently expansive monetary policy, plus the improved general economic environment, awakened the interest of investors. This also benefited corporate bonds in the investment-grade segment. Persistently low interest rates in Europe further in-creased investors’ interest in additional returns in the first half of 2014, which had a particularly favourable effect on demand for longer terms, hybrid and high-yield bonds. The geopolitical crises had no lasting influ-ence on the development of European corporate bonds.

Performance of the EWE bonds in the first half-year 2014

Spread vs. mid-swaps (bp)

April

EWE 12-year

EWE 15-year

EWE 9-year

iBoxx Liquid Corporates

iBoxx Liquid Utilities

120

100

80

60

4040

60

80

100

120

Jan. Feb. March May June July

6 EWE INTERIM REPORT 2014

EWE AG 10 / 04 (EWE 15-year bond)



ISIN DE000A0DLU69 DE000A0Z2A12 XS0699330097

Security code no. A0DLU6 A0Z2A1 A1K0ZZ

Issue date 14.10.2004 16.7.2009 4.11.2011

Maturity 14.10.2019 16.7.2021 4.11.2020

Currency EUR EUR EUR

Volume 0.5 billion 0.5 billion 0.5 billion

Nominal amount 1,000.00 1,000.00 1,000.00

Coupon type Fixed coupon Fixed coupon Fixed coupon

Nominal interest 4,875% 5,250% 4,125%

Interest paid Annually Annually Annually

Interest payment date 14.10. 16.7. 4.11.

Issue spread 2004 + 52bp – –

Issue spread 2009 – + 160bp –

Issue spread 2011 – – + 165bp

Spread as at 30.6.2014 + 63bp + 92bp + 73bp

The average risk premium of the index for utilities bonds fell less strongly in the first half of 2014 against the iBoxx € Liquid Corporates Index. The iBoxx € Liquid Utilities Index closed at the end of June at around eight base points below the level seen at the beginning of the year. This tallies with the performance of the mar-ket as a whole, which was quoted some 13 base points lower against the iBoxx € Liquid Corporates Index.

The EWE bonds developed positively compared with both the market as a whole and the index for utilities bonds. As at the end of the first six months, the bonds that will mature in 2019, 2020 and 2021 respectively were quoted with substantially lower yield markups than at the beginning of the year.

EWE rating

EWE’s issuer rating, like the EWE bonds, is assessed as Baa1. In June 2014, Moody’s upgraded the outlook from negative to stable. The agency justifies this improved assessment by referring to EWE’s return to more relaxed investment activities following the completion of sev-eral significant large-scale projects. Another reason is the positive reception of agreed price adjustments for long-term gas procurement contracts as a result of pre-vious years’ negotiations.


Interim group management report1 January to 30 June 2014

09 Basic principles of the Group

09 Legal Group structure

09 Generation segment

10 Infrastructure segment

10 Sales and Trading segment

11 International and IT segment

12 Central Divisions/Consolidation segment

12 General economic conditions

12 Energy market

13 Energy prices

15 Telecommunications market

15 Political and regulatory situation

17 Current situation of the EWE Group

17 Earnings position of the EWE Group

18 Significant developments in the consolidated income statement

19 Segments

21 Assets position of the EWE Group

22 Financial position of the EWE Group

22 Employees

23 Supplementary report

23 Risk report

23 Outlook

23 Future macroeconomic developments

23 Anticipated earnings development

24 Forward-looking statements


Legal Group structure

EWE Aktiengesellschaft (EWE AG) is the holding compa-ny of the EWE Group. It is based in Oldenburg and the share capital is held by the three large shareholders, Weser-Ems-Energiebeteiligungen GmbH, Oldenburg, with 59 per cent, Energie Baden-Württemberg AG, Karlsruhe, with 26 per cent and Energieverband Elbe- Weser Beteiligungsholding GmbH, Oldenburg, with 15 per cent. The Group’s companies are active in multi-ple regional domestic and foreign connected market areas. The group of consolidated companies as at 30 June 2014 comprises 57 fully consolidated compa-nies and 12 companies accounted for using the equity method. The increase in the number of fully consoli-dated companies since 31 December 2013 (+3) is the result of reorganisation within the Group. The number of companies accounted for using the equity method remains unchanged.

Generation segment

The Generation segment combines electricity genera-tion from renewable energies, conventional generation and the Group’s waste disposal and gas storage busi-ness units.

The EWE Group has installed renewable energy genera-tion plants (wind, biomass, solar) with a total capacity of around 300 megawatt (MW). This capacity includes the Group’s proportionate share of the capacity of com-panies accounted for using the equity method. EWE ERNEUERBARE ENERGIEN GmbH constructs and oper-ates regenerative energy power plants, with some of the plants being operated under participation or part-nership models. The focus is on project development and the operation of onshore wind farms. In addition to this, the company operates a biogas plant and five biogas processing plants. swb CREA GmbH develops, plans, constructs and operates plants with a focus on onshore wind and biogas. The company also manages a river hydroelectric plant in Bremen. The segment’s off-shore activities include the operation of two offshore wind farms in the German North Sea, as well as the provision of services for the planning, construction and operation of offshore energy generating plants. In the first six months of the year, construction work on the

Riffgat offshore wind farm was brought to a success-ful conclusion. The turbines have been in operation since June 2014.

The Group also operates five power plant blocks (in-cluding reserve capacity) with an electrical load factor of around 900 MW and around 600 MW of installed district heating load factor at three sites. Hard coal, natural gas and blast furnace gas is used for fuel; in ad-dition to this, replacement fuels such as residue from roasting coffee and Fuller’s earth are used. A gas and steam power plant with an electrical load factor of ap-proximately 440 MW is currently being built together with partners in Bremen-Mittelsbüren.

0

50

100

150

200

250

300

* Including investments accounted for under the equity method

136.5

300.4

2.83.65.7

300

250

200

150

100

50

0

151.8 Wind onshore

Wind offshore

Hydroelectric

Biogas

Solar

Total

Generation capacities – renewable sources first half of 2014 *(in MW)

0

200

400

600

800

1000

1200

75.0

1,045.01,200

1,000

800

600

400

200

0

970.0

Conventional

Waste-to- energy

Total

Generation capacities – conventional sources first half of 2014(in MW)

Basic principles of the Group


With a working gas storage capacity of approximately 1.9 billion cubic metres, the EWE Group is one of the largest operators of gas storage operations in the Ger-man natural gas market. The capacity is spread over a number of storage caverns in Lower Saxony, Bremen and Brandenburg. The storage cavern in Jemgum (region Emden / Bunde / Oude Statenzijl) has been available to the market since November 2013. It officially began operating on 15 May 2013 after seven years of plan-ning and construction work. The storage cavern is characterised by its excellent location in the German and Dutch natural gas market. It provides access to many pipeline networks and import points for high-grade gas via the German market areas of GASPOOL and NetConnect Germany and the European market-place TTF in the Netherlands.

Infrastructure segment

The Infrastructure segment includes the electricity grid, natural gas grid and telecommunications network of the EWE Group (excluding abroad) as well as the wastewater business and real estate holdings. EWE operates modern and efficient electricity and natural gas networks in the Ems / Weser / Elbe region and the state of Bremen. EWE is present in Brandenburg, Rügen and northern West Pomerania as a gas network opera-tor. Due to its very low levels of downtime, EWE has one of the most secure networks of all the European distribution system operators. The Group also operates district heating and drinking water networks as well as a highly complex communications network.

Network participation model: 64 towns and municipal-ities currently hold investments in EWE NETZ GmbH totalling € 31 million. Local authorities are able to acquire shares in the EWE alliance region up to a maxi-mum of 25.1 per cent until 2018.

Distribution system operators are legally obliged to pursue their own branding policy so as to avoid con-fusion with the activities of energy suppliers. For this reason, network companies have been given a new brand identity with visual changes relating to the image, text and colour, or carry a new name (“wesernetz – an swb company”).

The segment includes the operation of a gas pipeline network (L-gas) of approximately 320 km. In accord-ance with the German Energy Economy Law (EnWG) this network level must be kept legally and organisa-tionally separate from the Group’s other activities. Gastransport Nord GmbH markets capacity as an in-dependent transport network operator. The gas pipe-line network is connected to the European natural gas pipeline network at the Oude Statenzijl border crossing in the Netherlands.

The wastewater activities are focused on collecting and purifying wastewater using its own wastewater puri-fication plants and network, among other things. In addition, the segment includes the real estate segment which specialises in letting and managing land and buildings owned by EWE AG.

Sales and Trading segment

The Sales and Trading segment includes the energy and telecommunications sales entities and the Group’s energy trading business. The sales entities concen-trated in this segment operate on an integrated basis as regional providers of energy and telecommunica-tions services. The business activities serve the Ems / Weser / Elbe region in northwest Germany, parts of Brandenburg and Rügen and the State of Bremen. The customer base includes private households as well as industrial, commercial and local authority custom-ers. In their own network areas the Group companies are market leaders in the sale of energy.

0

20

40

60

80

100Total

Copper

Optic fibre

Network lengths first half of 2014 *(in thousands of km)

100

80

60

40

20

0

92.2

59.7

35.5

20.515.0

Electricity

Natural gas

Telecommunications

* Not including Poland and Turkey


The energy trading business is responsible for the prompt procurement of energy on the basis of long-term procurement and marketing strategies. The EWE Group’s Energy Trading division is active on the elec-tricity spot market EPEX SPOT and in over-the-counter (OTC) trading. On the basis of sales, EWE TRADING GmbH counts as one of Germany’s ten largest energy trading companies.

Significant products and services

The Sales and Trading segment offers its customers electricity and natural gas products as well as telecom-munications, energy end-use efficiency, energy man-agement services and innovative combinations of communications and energy. The telecommunications business includes the complete range of modern tele-phony and internet services, from cloud computing and online television through to accredited data pro-cessing centres.

The Energy Trading division provides electricity and gas grid management services, trades in CO₂ certificates on behalf of customers, markets electricity from wind energy plants and processes payment and delivery streams.

International and IT segment

The International and IT segment brings together the business activities in Turkey and Poland as well as the Information Technology division. Through EWE Turkey Holding in Istanbul, EWE holds a majority sharehold-ing of 80 per cent each in two natural gas suppliers, 100 per cent of a gas trading company and 100 per cent of an energy service company. This makes EWE the largest foreign investor in the Turkish gas sector.

Combined, the two gas suppliers hold around 20 per cent of the private customer market. The gas trading company has held a gas trading and liquid gas licence for many years, and also holds an electricity trading licence. It supplies industrial customers, organised industrial zones, gas power plants and distributors

throughout the country, and since 2013 has started supplying some customers with electricity.

The sale and distribution of natural gas is also the core activity of the Polish business operations. Distribution activities are focused on the “voivodeship” (district) of Lebus. In addition, private and commercial customers in other voivodeships in southern and eastern Poland are supplied by EWE. At the beginning of 2014 the portfolio was expanded and electricity is now offered for sale to business customers.

BTC Business Technology Consulting AG and its subsid-iaries are among the leading providers of information technologies in Germany. The focus is on consulting, system integration, system management and software products.

Natural gas customers in Turkey

1,000,000

800,000

600,000

400,000

200,000

02013 2014

0

200000

400000

600000

800000

1000000

769,333

886,998

0

3000

6000

9000

12000

15000

Natural gas customers in Poland

15,000

12,000

9,000

6,000

3,000

02013 2014

11,87312,881


Central Divisions/Consolidation segment

The Central Divisions/Consolidation segment includes the companies EWE AG, swb AG, swb Bremerhaven GmbH, EWE swb ISIS GmbH, EWE IMMOBILIEN GmbH and swb Messung und Abrechnung GmbH. In addition, VNG – Verbundnetz Gas AG (at equity) is allocated to this segment.

EWE intends to increase its VNG shareholding by 15.8 per cent to 63.7 per cent. This is based on an agree-ment to this effect with the shareholder Wintershall dated 14 March 2014. EWE currently holds 47.9 per cent of the shares in wholesale gas transmission com-pany VNG. The transaction is still subject to approval by the anti-trust authorities.

The Group strategy and Group management and moni-toring are largely unchanged compared to 31 Decem-ber 2013.

General economic conditions

Global economic growth at the beginning of 2014 was marginal and continued to lose momentum in subse-quent months according to the Kiel Institute for the World Economy. Global gross domestic product rose by 2.6 per cent, following a 3.6 per cent increase in the second half of 2013.

The economic recovery in the eurozone also remained muted at the beginning of 2014. Overall economic pro-duction grew at only a modest pace in the first quarter with an annualised rate of 0.7 per cent.

The favourable development in Germany had a positive effect as the economy expanded at a much greater pace than in the previous quarter, helped by a mild winter.

In Turkey, turbulence on the capital market had a nega-tive impact, partially as a result of domestic political tensions. The Turkish lira temporarily lost value at the beginning of the year. This contributed to a strong rise of 7 per cent in exports and a decline of 2.4 per cent in imports in the first quarter of 2014 compared to the previous quarter. The country’s gross domestic product consequently grew by 1.7 per cent.

Poland’s economy remained on its growth course. Pri-vate consumption increased slightly as a result of real wage rises. Investment activity picked up noticeably. The recovery in domestic demand was accompanied by a favourable trend in foreign trade. Overall, gross do-mestic product rose by 1.1 per cent in the first quarter.

Energy market

Energy consumption in Germany fell in the first half of 2014 by almost 8 per cent compared to the same peri-od last year. The reason for this unusually sharp decline was the mild weather experienced at the beginning of the year and the exceptionally cold spell experienced in the previous year by way of contrast. Following mathe-matical adjustments to the temperature influence and other special factors made by the Working Group for Energy Balances (AGEB), energy consumption fell by between 1 and 2 per cent in the first six months of the year under review.

Oil consumption was down by around 4 per cent in the first half of 2014 compared with the same pe-riod a year ago. Mild temperatures and high stockpiles held by the consumers led to a decline in heating oil sales. According to preliminary estimates, natural gas consumption dropped by almost 20 per cent (446 compared with 556 billion kWh). This development was caused primarily by the extreme weather condi-tions and a further decrease in the use of natural gas in power plants. This was accompanied by production downturns in the chemical primary-materials industry.


Consumption of hard coal fell sharply and was almost 7 per cent down on the same period last year. While deliveries to the iron and steel industry were up by al-most 8 per cent, the use of hard coal in power plants declined by more than 12 per cent, primarily as a result of the high availability of renewable energies for elec-tricity generation. Consumption of lignite dropped by almost 4 per cent because of reduced deliveries to power plants as a result of several inspections. Nuclear energy also declined by around 2 per cent.

In the first six months of this year, the use of renewa-ble energies was up by 1 per cent and thus slightly higher than in the same period a year ago.

Electricity consumption fell by 5 per cent to 268 bil-lion kWh in the first half of 2014. Again, the mild weath-er is the main reason for this development. This has led to an increase in the renewable energies’ share of total consumption to an estimated 28.5 per cent (previous year: 24.6 per cent). This was the result of preliminary assessments conducted by the German Association of Energy and Water Industries (BDEW). With 31 billion kWh, wind power generated around 21 per cent more electricity than in the first half of the previous year and photovoltaic systems more than 27 per cent with around 18 billion kWh, while even bio-mass recorded an increase of a little over 5 per cent with 22 billion kWh of generated electricity. However, this development does not yet allow any conclusions to be drawn about 2014 as a whole, as electricity gener-ation from renewable energies normally varies consid-erably depending on the season and weather.

Gross electricity production from conventional power plants declined significantly in parts: the share of gross electricity production from natural gas fell again to just 10 per cent in the first half of 2014 (prior-year peri-od: 11.4 per cent). The share of electricity generated in hard coal power plants still came to 18 per cent (19.7 per cent). Nuclear power plants with a share of more than 15 per cent (15.1) and lignite power plants with a share of just over 25 per cent (25.3) were on a par with the same period last year. All in all, the plants generated a combined total of 308 billion kWh of electricity (320).

Energy prices

The mild weather experienced in the first half of the year caused prices of almost every energy trading product to fall. Only the price for CO₂ emissions certi-ficates managed to rise at the beginning of the year. This was attributable to the agreement on a change in the auctioning regulation, which provides for a post-ponement of auction quantities, otherwise known as backloading. It stipulates that a total of 900 million emissions rights (EUA) should be removed from the market across the EU between 2014 and 2016.

The unfolding crisis in Ukraine had an increasing effect on the development of energy prices in the spring. However, the significant supply surplus in a number of markets served to offset this development. In con-clusion, markets are very volatile in some places depend-ing on the current news situation.

Oil price developments

A very good global supply situation and the rapproche-ment between the West and Iran on the subject of the latter’s nuclear power issue contributed towards moderate prices up to the end of March. In spring the escalating situation in Ukraine also fuelled a further rise in oil prices. Subsequently the Brent month ahead price on the Intercontinental Exchange, ICE, ranged between US$ 107 and US$ 110 per barrel (US$ / bbl). In June, the situation in Iraq and Syria caused the price to rise temporarily to US$ 115 / bbl. It has since fallen by around US$ 3 to US$ 112 / bbl.

116

113

110

107

104Jan. March April JulyMayFeb. June

Development of Brent crude oil price 2014, month ahead price (ICE)

(US$ / bbl)

104

107

110

113

116


Natural gas price developments

The European gas futures market developed in a very volatile fashion in the first half of the year, albeit with a generally downward trend. At the beginning of the year, the price for supplies of natural gas in the subse-quent year on the Dutch virtual trading point Title Transfer Facility was still € 26.26 per megawatt-hour (MWh). The very mild winter and the associated low quantity of stored gas used caused natural gas prices to decrease to € 23.33 / MWh at the end of March. The situation in Ukraine then began to dominate pric-ing. The contract price subsequently rose again to € 24 / MWh.

Coal price developments

The market for power plant coal was characterised by a major oversupply in the first half of 2014. At the be-ginning of the year the price for 2015 hard coal was still around US$ 87 / tonne (US$ / t). The price then pro-ceeded to drop to almost US$ 80 / t in February. As a result of the crisis in Ukraine, the contract price then increased briefly to US$ 84 / t again. Fundamental fac-tors then began to grow in importance again, pushing the price below US$ 80 / t, meaning that the hard coal price API#2 Cal 15 was even trading below US$ 79 / t on the EEX for the following calendar year.

Jan. March April JulyMayFeb. June

Changes in natural gas prices in 2014, TTF-year-ahead contract (ICE)

(in euro / MWh)

27

26

25

24

2323

24

25

26

27

Price trends for CO₂ emissions certificates

The price for CO₂ emissions certificates, EUA Dec 14, was € 4.81 per tonne of CO₂ at the beginning of the year. The decision of the European Parliament on back-loading resulted in contract prices rising by around 50 per cent to over seven euro by the end of February. When it became known in March that actual green-house gas emissions had declined again, the price for CO₂ emissions rights returned to the level seen at the start of the year. Since then, the price for CO₂ emis-sions certificates on the Intercontinental Exchange has ranged between five and six euro per tonne.

USD / t

Euro / t


Changes in hard coal prices in 2014, year-ahead contract (EEX)

(in US$ / t and translated into EUR / t, ECB daily quotation)

90

80

70

60

5050

60

70

80

90


Price changes in CO₂ certificates in 2014, EUA December 2014 (ICE)

(in EUR / EUA)

8

7

6

5

44

5

6

7

8


Development in price of wholesale electricity

At the start of the year, the forward contract for base load deliveries cost € 36.01 / MWh on the EEX. This level was maintained well into March. The electricity price then followed the other energy trading products and dropped to below € 34 / MWh. Since then, the contract price has ranged between € 34 and € 35 per megawatt-hour in a market characterised by very low trading volumes.

Competition

Competition on the energy market remains dynamic. The number of electricity and gas suppliers has risen considerably over the past few years. The same applies to the numbers of consumers switching providers. Based on the calculations of the German Association of Energy and Water Industries (BDEW), 34.3 per cent of customers have changed their electricity provider at least once since liberalisation began in 1998. Compared with autumn 2012, when the cumulative switching rate was still 29.7 per cent, this represents an increase of almost 5 per cent. The willingness of customers to switch providers in the gas market, which was liber-alised in 2007, also continues to rise: 26.6 per cent of

Changes in wholesale electricity prices in 2014, base load, year-ahead contract (EEX)

(in euro / MWh)

37

36

35

34

33Jan. March April JulyMayFeb. June

33

34

35

36

37

households have entered into a contract with a new gas provider at least once – a figure almost 9 per cent higher than in September 2012 (17.8 per cent). Aside from this, many customers have signed new electricity and gas delivery contracts with their existing supplier.

Telecommunications market

Competition in the market for telecommunications services, too, was again highly dynamic. In addition to this, the process of consolidation continues. Several takeovers in the German and European telephone mar-ket indicate an increase in competitive pressure. This is also reflected in falling average prices for landline and internet products, which in turn has led to a increase in the number of packages offered.

The rising demand for fast internet connections and the enhancement of the broadband infrastructure required for this across the country, notably in the more remote regions, are core issues. In addition to the activi-ties at Federal level, such as the digital agenda of the Federal government, the network alliance of the Federal Ministry for Transport and the IT summit, the State of Lower Saxony is also working together with companies on a broadband concept. EWE TEL GmbH is involved in this discussion as a competent contact partner.

Political and regulatory situation

In the first half of 2014, the amendment to the Renew-able Energy Act (EEG) was the focus of the debate on energy policy. The amendment was passed by the Ger-man Bundestag (lower house) at the end of June. The Federal Minister for Economic Affairs, Sigmar Gabriel, also presented a timetable for further energy policy reforms. The intention is to develop a strategy for more energy efficiency. Measures are being developed for the future design of the electricity market which will then feed into a legislative procedure and should be com-pleted by the middle of 2016.


The European Commission is drawing up a framework for climate and energy policy up until 2030. This will replace the “20-20-20 targets” with which greenhouse gas emissions are to be cut by 20 per cent, energy effi-ciency increased by 20 per cent and the proportion of renewable energies in relation to total energy con-sumption raised to 20 per cent. For 2030, the Commis-sion proposes a pan-European greenhouse gas reduc-tion target of 40 per cent compared with 1990, as well as a binding EU-wide target of 27 per cent for the expansion of renewable energies for 2030. Energy efficiency should also remain part of the EU’s future climate and energy policy. The EU energy and climate framework policies should form the basis for interna-tional climate negotiations with regard to the new international protocol to be concluded in 2015.

Renewable Energy Act (EEG) revision

The revision to the Renewable Energy Act (EEG) pro-vides for binding expansion targets for energy sources such as wind, water, solar and biomass for the first time. In addition, subsidy levels will be reduced and direct marketing obligations introduced. This means that the EEG levy, which forms part of the electricity price, is set to remain in place until 2017. The legislative reform will bring major changes for self-suppliers: a proportionate EEG levy will be charged in future on self-produced and consumed electricity. Small pro-ducers and consumers continue to be exempted from this. The new Renewable Energy Act (EEG) also lays down rules on the extent to which companies with high electricity consumption levels can receive relief from the levy. The amendment came into effect on 1 August 2014.

New guidelines for environmental and energy subsidies

In April 2014, the European Commission passed new guidelines for environmental and energy subsidies. These came into effect on 1 July 2014, replacing the currently applicable regulations on environmental pro-tection subsidies. The guidelines contain rules on how to design national subsidy systems for renewable ener-gies, reserve power plants and efficiency measures. The core aim is to replace subsidies for renewable energies

with tendering procedures as of 2017. State subsidies should then only be available for technologies that are not yet ready to be marketed. It shall basically remain permissible to exempt electricity-intensive industries from the EEG levy.

Emission Trading Scheme reformed

The regulation for a change to the auction schedule for greenhouse gas emissions certificates came into effect in March 2014. According to this, 400 million certificates will be removed from the market in 2014, 300 million in 2015 and a further 200 million in 2016. 300 million certificates should then be returned to the market in 2019 and 600 million certificates in 2020. The aim of this “backloading” is to put a stop to the fall in prices of emission trading certificates. A higher price level for emissions certificates is being targeted, creat-ing incentives for capital expenditure in low-emission technologies.

In order to stabilise the Emission Trading Scheme in the long term and to avoid a severe under- or oversupply of emission certificates, the European Commission pre-sented a legislative proposal on 22 January 2014 for the introduction of a market stability reserve as part of the Emission Trading Scheme. To this end, consultations and negotiations between European players are currently being held, whereby the new regulations are expected to come into effect in 2015.

Incentive system – Secondary regulatory period commenced

The second electricity distribution regulatory period commenced on 1 January 2014. The German Federal Network Agency has certified EWE NETZ GmbH and wesernetz Bremen GmbH with 100 per cent efficiency for the operation of the electricity grids. The efficiency figure for wesernetz Bremerhaven GmbH is 95 per cent.

Implementation of the energy efficiency directive under way

The deadline to implement the EU energy efficiency directive into national law expired on 5 June 2014 without legislative measures having been effected up to then. The German government sent a notification to the European Commission punctually. A key point


here is the notification of the end-user energy saving target to be achieved by 2020 pursuant to article 7 of the directive. The German government calculated 1,758 petajoule as Germany’s target. With the existing eligi-ble measures, the German government will achieve savings of 1,467 petajoule according to its report. It intends to present a national action plan for energy efficiency in the autumn. This should contain proposals on how the existing gap between the savings target and what has already been achieved can be closed. The first known cornerstones of the action plan are to ex-pand and consolidate the CO₂ building refurbishment programme, subsidise efficiency measures for busi-nesses, local communities and households from the energy and climate fund, subsidise independent energy consultations and increase the supply of free energy advice for low-income households.

Flexible expansion of fibre optic networks

Following the drafting of regulations governing the use of vectoring, their implementation has been a key issue in the regulatory environment since the end of July 2014. Moreover, the German Federal Network Agency has enabled the flexible expansion of fibre optic net-works to the service area of interfaces (fibre to the cabinet, FTTC) at the request of EWE TEL GmbH. This means that, in the future, EWE TEL is going to benefit from more access possibilities, improved processes and lower fees.

New EU procurement directives adopted

In April 2014, new EU procurement directives were adopted. These generally contained stricter require-ments for tendering public contracts, although munici-pal water companies were excluded from them. This has the potential to skew competition in view of, for example, contracts in the future being awarded to private-sector wastewater companies. This means that municipalities can decide on a solution by themselves or within a local authority alliance without the need to initiate a tendering process. This means that private- sector providers could be forced out of the market. The directive must be incorporated into national law within 24 months.

Liberalisation of the Turkish natural gas market makes progress

The Turkish Energy Market Regulatory Authority (EMRA) has cut the threshold beyond which business customers are able to freely choose their supplier of natural gas. The figure is now 100,000 cubic metres (m3) per year. The previous figure was 300,000 m3 per year. This now means that, in practice, only household cus-tomers in Turkey are excluded from being able to freely choose their supplier of natural gas.

Current situation of the EWE GroupThese abridged interim consolidated financial state-ments for EWE AG for the first half-year 2014 have been prepared in accordance with IAS 34 (Interim Reporting) as applicable in the EU. For the preparation of the interim consolidated financial statements the accounting methods used to prepare the consolidated financial statements as of 31 December 2013 have been applied unchanged. The abridged interim con-solidated financial statements do not include all the in formation and disclosures required for year-end consolidated financial statements and should therefore be read in conjunction with the consolidated financial statements as of 31 December 2013.

Earnings position of the EWE Group

The sustainability of the EWE Group’s business opera-tions is of particular importance for both internal management purposes and external communication of our current and future results. Operating EBIT is an adjusted result which is the key figure used to present and manage the operating earnings position. When operating EBIT is being calculated, the EBIT is adjusted for (special) circumstances in the areas of derivatives, shareholdings and impairment losses. The demarcation of these circumstances classified as “non-operating” is performed by designating every item on the income statement as either operating or non-operating.


The very mild temperatures continued in the first half of the 2014 financial year. The unseasonably warm winter compared with previous years, followed by an exceptionally warm spring, resulted in considerable lower sales volumes for gas, electricity and heating. The EWE Group was not able to shield itself from these weather-related factors. In the electricity segment, the trend in spot market prices also had a negative effect on sales. In addition to this, standard-rate electricity customers in some parts of the EWE Group’s supply area received a reduction in rates as of 1 January 2014. As regards electricity, a reduction in average consumption can also be observed among standard-rate customers. In addition, operating EBIT was negatively impacted by declining results of investments accounted for using the equity method and unrelentingly high competitive pressure coupled with an unchanged and difficult reg ulatory environment. Overall, the EWE Group gen-erated an operating result for the first half of 2014 which was lower than in the same period a year ago: at € 186.5 million, it was 50.6 per cent below the pre-vious year’s level.

The situation described above is also reflected in the result for the period and the EWE Group’s EBIT. The result for the period before minority interests came to € 18.2 million for the first six months of 2014, which represents a year-on-year decrease of € 150.9 million. EBIT has fallen from € 360.0 million to € 139.8 million.

EUR million01.01. –

30.06.201401.01. –

30.06.2013

Consolidated result for the period 18.2 169.1

Net interest income / expense 95.4 97.8

Income taxes 26.2 93.1

EBIT 139.8 360.0

Effect of derivative valuations 48.2 -5.8

Impairment charges against (non-operating) property, plant and equipment 1.2 1.4

Effect from the disposal of property, plant and equipment -2.7 22.0

Operating EBIT 186.5 377.6

Significant developments in the consolidated income statement

In the first six months of 2014, the EWE Group gener-ated external sales (excluding electricity and energy taxes) of € 4.15 billion. This represents a decline of 11 per cent compared with the same period a year ago. The decline in sales stemmed mainly from weather-related economies of scale and price adjustment measures.

The balance of other operating income and other oper-ating expenses came to € -182.0 million (first half of 2013: € -152.7 million). The change compared with the same period last year is largely attributable to valua-tion effects for derivative financial instruments and underlying transactions in the Energy division reported in the balance sheet.

At 80.1 per cent, the materials usage ratio, measured in relation to sales, worsened by 1.5 percentage points compared with the first six months of 2013.

In total, depreciation, amortisation and impairment fell from € 252.4 million to € 208.1 million given that there was no need for any noteworthy impairment losses in contrast to the first half of 2013.

The operating EBIT is reconciled to the consolidated result for the period as follows:


The decline in the result of financial investments accounted for using the equity method from € 66.3 mil-lion to € 7.4 million is primarily the result of the share-holding in VNG – Verbundnetz Gas AG, Leipzig.

Net interest income / expense amounting to € -95.4 mil-lion is principally made up of interest paid on four bearer bonds (EWE bonds), interest on six placed bonds, interest on current bank debt and the compounding of non-current provisions.

Income taxes fell by € 66.9 million to € 26.2 million as a result of higher deferred tax assets and lower deferred tax expenses – in the same period last year deferred tax assets in the amount of € 36.0 million were subjected to a value adjustment.

Segments

Generation

In the Generation segment, external sales came to € 192.9 million and were therefore on a par with the previous year. The segment’s share of total Group sales amounts to around 4 per cent (first half of 2013: 4 per cent). Operating EBIT was € 45.9 million (first half of 2013: € 47.3 million).

Division of sales revenue by segment *(in %)

Generation

Infrastructure

Sales and Trading

International and IT

(4)4

(11)10

(18)24

62(67)

* (proportions in the prior-year period)

Infrastructure

The external increase in sales in the Infrastructure seg-ment to € 984.1 million represents a rise of 18 per cent and is mainly attributable to higher feed-in volumes for renewable energies. A lower throughput of natural gas due to weather-related factors was recorded together with lower network use charges for gas. Network use charges for electricity also declined as a result of pric-es. The lower network use charges led to a lower oper-ating EBIT compared with the previous year.

The segment’s share of total Group sales therefore amounted to around 24 per cent (first half of 2013: 18 per cent). Operating EBIT was € 137.5 million (first half of 2013: € 239.9 million).

Sales and Trading

The Sales and Trading segment, together with the en-ergy, telecommunications and trading business units, recorded a decline in external sales of 18.2 per cent to around € 2.57 billion. The macroeconomic situation described above contributed to the decline in the Elec-tricity, Gas and Trading segments. In contrast, the tele-communications business unit recorded a fall in sales of just 2.1 per cent. The segment’s share of total Group sales amounted to around 62 per cent (first half of 2013: 67 per cent). Operating EBIT was € 36.3 million (first half of 2013: € 52.1 million).



In the International (Turkey and Poland) and IT seg-ment, sales fell 19 per cent to € 402.6 million. This relates primarily to the Turkey business unit where both weather and currency effects caused a drop in

0

2000

4000

6000

8000

10000

Standard customers

Special-rate customers

Local utilities

Total (excluding own consumption)

Electricity sales by customer group (in Germany)

(in million kWh)

10,000

8,000

6,000

4,000

2,000

0

2,488

2013 2013 2013 20132014 2014 2014 2014

2,272

4,755

1,180

4,655

1,260

8,423 8,186

Total

0

2000

4000

6000

8000

10000

Standard customers

Special-rate customers

Local utilities

Total (excluding own consumption)

Natural gas sales by customer group (in Germany)

(in million kWh)

30,000

24,000

18,000

12,000

6,000

0

13,703

2013 2013 2013 20132014 2014 2014 2014

9,3017,698

3,092

7,882

2,437

24,492

19,621

Total

trading and energy sales. The segment’s share of total Group sales therefore amounted to around 10 per cent (first half of 2013: 11 per cent). Operating EBIT was € 7.7 million (first half of 2013: € 14.1 million).

Electricity and gas sales in the reporting period developed as follows:


Turkish gas sales in the reporting period developed as follows:

Central Divisions/Consolidation

The Central Divisions/Consolidation segment gener-ates only minor sales of its own. Operating EBIT to-talled € -40.8 million (first half of 2013: € 24.2 million) and was the result of the segment’s holding function as well as the holding companies and other sharehold-ings assigned to it. The decline in operating EBIT is due mainly to the shareholding in VNG – Verbundnetz Gas AG, Leipzig.

In total, the EWE Group’s balance sheet structure as at 30 June 2014 has changed only slightly since 31 De-cember 2013. The nature of business engaged in by the EWE Group means that it has a high investment inten-sity and a correspondingly high level of capital commit-ment. Non-current assets consequently account for 73 per cent of the balance sheet total. This figure has changed only slightly compared with 31 December 2013. In the reporting period, payments for expansion investments were made in the amount of approximate-ly € 156 million and related primarily to the Infrastruc-ture (€ 65 million), Generation (€ 46 million) and Sales and Trading (€ 27 million) segments. Non-current as-sets are financed by means of equity and non-current borrowings.

Current assets contain cash and cash equivalents of around € 1,1 billion. They also serve to repay a bond due in October 2014 amounting to € 642.7 million, which is recognised under current liabilities.

The equity ratio remains unchanged at 23 per cent.

Non-current liabilities include bonds, pension provi-sions and construction subsidies in particular.

0

3000

6000

9000

12000

15000

Natural gas sales in Turkey(in million kWh)

20,000

16,000

12,000

8,000

4,000

02013 2014

16,422

13,499

Equity and liabilitiesEUR million 30.06.2014 in % 31.12.2013 in %

Shareholders’ equity 2,333.4 23 2,395.7 23

Non-current liabilities 5,126.6 51 5,301.7 51

Current liabilities 2,667.5 26 2,673.0 26

Total equity and liabilities 10,127.5 100 10,370.4 100

AssetsEUR million 30.06.2014 in % 31.12.2013 in %

Non-current assets 7,422.0 73 7,399.4 71

Current assets 2,705.5 27 2,971.0 29

Total assets 10,127.5 100 10,370.4 100

Assets position of the EWE Group


Cash flow from operating activities forms a central ele-ment of financing for the EWE Group. In the first six months of 2014, cash flow from operating activities amounted to € 545.7 million. The positive change com-pared with the same period last year is largely attribut-able to the decline in trade receivables and inventories.

The cash flow from investing activities in the first half of 2014 was defined mainly by new investment in the Infrastructure, Generation and Sales and Trading segments.

The cash flow from financing activities includes in par-ticular dividends amounting to € 88 million for the 2013 financial year, which were paid to the shareholders of EWE AG.

The cash and cash equivalents will also be used to repay a bond due in October 2014 amounting to € 642.7 million.

The EWE Group’s financial flexibility is secured via bilateral credit lines and a syndicated revolving credit facility for € 850.0 million agreed until July 2017. € 809.0 million of this has been extended with a term until July 2018. As of 30 June 2014, EWE AG had drawn down € 0.0 million (31 December 2013: € 0.0 million) of this facility.

EmployeesIn the first half of 2014 the EWE Group employed an average of 9,232 staff. This represents an increase of 80 (+0.9 per cent) in the average number of persons em-ployed compared to the same period last year. This increase is largely the result of additional people being employed in the Turkish subsidiaries. The number of employees represents the number of active full- and part-time staff, plus the assistants and trainees.

Based on the new Group structure employee numbers are classified in the relevant Generation, Infrastructure, Sales and Trading, International and IT and Central Divisions/consoli dation segments.


30.06.201401.01. –

30.06.2013 Change absolute

Cash flow from operating activities 545.7 179.9 365.8

Cash flow from investing activities -84.1 -206.2 122.1

Cash flow from financing activities -115.4 -98.5 -16.9

Net change in cash and cash equivalents 346.2 -124.8 471.0

Currency translation and consolidation changes 2.3 -5.5 7.8

Cash and cash equivalents at the beginning of the period 729.7 848.2 -118.5

Cash and cash equivalents at the end of the period 1,078.2 717.9 360.3

Financial position of the EWE Group

769(-8)

2,525(-7)

2,509(-67)

2,372(-6)

* (changes against the same period last year)** Due to rounded figures for the individual segments, the total

number of employees deviates from the sum of the segment totals

Generation

Infrastructure

Sales and Trading


Central Divisions / Holding

1,059(+168)

Number of employees by segment *

2014Total

9,232 **(+80)


In the International and Information Technology (IT) segment, 2,372 people were employed as at 30 June of the current year. While the number of employees in the IT business unit fell by 88 to 1,565 and the level in Poland is slightly below that of the previous year, 697 people are employed in Turkey. This represents an in-crease of 80 employees over the same pe riod last year.

The increase of 168 in the number of employees in the Central Divisions / Holding segment to a total of 1,059 is due primarily to the fact that a number of individual functions and duties from other segments were brought together.

Supplementary report The Free and Hanseatic City of Bremen and the mari-time city of Bremerhaven acquired 25.1 per cent of the voting rights in the network companies of swb AG in Bremen and Bremerhaven in July 2014. The network companies of swb AG in Bremen and Bremerhaven have signed easement concessions with both cities for all supply branches. Aside from this, there have been no events since 30 June 2014 which had a significant effect on the asset, financial and earnings position.

Risk reportCompared with the risk situation depicted in the Group management report as of year-end 2013, there have been no significant changes in the reporting period that would significantly influence the risk profile of the EWE Group.

In overall terms, there are currently no discernible risks that might jeopardise the continued existence of the EWE Group.

OutlookThis outlook contains statements regarding the ex-pected future development of the EWE Group and the company environment in the current financial year. It should be noted that current macroeconomic condi-tions increase the uncertainty regarding statements on

future development as the assumptions underpinning these may quickly lose their relevance. These under-lying conditions present opportunities and risks for the development of the company.

Future macroeconomic developments

The Kiel Institute for the World Economy (IfW) expects global economic growth to gather pace in the second half of 2014. In particular, growth in advanced econo-mies is expected to slowly gather pace. In contrast to this, growth in emerging economies will remain mod-est, particularly when compared with the high rates of expansion seen in the past decade. Overall, experts anticipate that global production will increase by 3.5 per cent.

In Germany, the IfW expects gross domestic product for the full year 2014 to grow by 2.0 per cent, after 0.4 per cent in the previous year.

Experts expect the gross domestic product in Turkey to contract by 1.5 per cent in the current year. The political situation will remain particularly fractious dur-ing August in the run-up to the presidential elections.

The German Institute for Economic Research expects domestic demand in Poland to become stronger. This expectation is supported by the recovery of the labour market and incentives for investment as a result of lower interest rates. This means that the Polish econo-my is set to expand considerably in the current year.

Anticipated earnings development

The statements made in the 2013 Group management report regarding the expected development of oper-ating EBIT for the 2014 financial year largely continue to apply.


Forward-looking statements

This interim report contains forward-looking state-ments based on assumptions and estimates by the management of EWE AG. Although company manage-ment believes that these assumptions and estimates are accurate, future developments and actual future results may differ considerably from these assumptions 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 develop-ments and the actual results achieved in future will coincide with the assumptions and estimates made in this interim report. EWE AG neither intends nor assumes any obligation to update forward-looking statements to reflect events or developments after the date of this interim report.

Oldenburg, Germany, 12 August 2014

Board of Management



Nikolaus Behr



Consolidatedinterim financial statements1 January to 30 June 2014

25 Consolidated interim financial statements

26 Income statement for the EWE Group

27 Statement of comprehensive income for the EWE Group

28 Balance sheet for the EWE Group

30 Statement of changes in shareholders’ equity for the EWE Group

32 Cash flow statement for the EWE Group

33 Notes to the abridged interim consolidated financial statements for EWE

33 1. Information about the company

33 2. Principles of preparing the financial statements and accounting methods

34 3. Group of consolidated companies

35 4. Segment information

37 5. Sales

38 6. Other operating income

38 7. Other operating expenses

38 8. Result of investments accounted for under the equity method

38 9. Other investment income

38 10. Income taxes

38 11. Dividend decided upon and paid

38 12. Pension provisions

38 13. Cash flow statement

38 14. Additional disclosures on financial instruments

44 15. Related party disclosures

45 Information on the Boards of EWE AG

46 16. Events after the reporting date

47 Confirmation by the legal representatives

48 Certificate of auditors’ review

EUR million Note01.01. –

30.06.201401.01. –

30.06.2013

Sales 5 4,343.3 4,887.5

Electricity and energy taxes 5 -195.4 -225.4

Sales (without electricity and energy tax) 4,147.9 4,662.1

Changes in inventories 1.1 3.3

Other own work capitalised 22.3 32.4

Other operating income 6 148.9 109.8

Cost of materials and services -3,324.5 -3,664.7

Personnel expenses -332.9 -320.2

Depreciation, amortisation and impairment -208.1 -252.4

Other operating expenses 7 -330.9 -262.5

Result of investments accounted for under the equity method 8 7.4 66.3

Other investment income 9 7.1 -15.3

Result from financial instruments 1.5 1.2

EBIT 1 139.8 360.0

Interest income 21.7 8.6

Interest expense -117.1 -106.4

Profit before tax 44.4 262.2

Income taxes 10 -26.2 -93.1

Result for the period 18.2 169.1

Of this:

Attributable to the parent company 17.8 167.9

Attributable to minority interests 0.4 1.2

18.2 169.1

1 Earnings before interest and taxes

Income statement for the EWE Groupfor the period from 1 January to 30 June 2014


Statement of comprehensive income for the EWE Groupfor the period from 1 January to 30 June 2014

EUR million Note01.01. –

30.06.201401.01. –

30.06.2013

Result for the period 18.2 169.1

Actuarial gains and losses from defined-benefit pension commitments and similar obligations 12 -104.5 -3.4

Deferred taxes on pensions 33.7 1.1

Total income and expenses recognised directly in equity with no future reclassification affecting result -70.8 -2.3

Exchange differences from foreign subsidiaries 3.3 -17.1

Cash flow hedges -8.0 -51.0

Deferred taxes on reserve for cash flow hedges 1.8 16.0

Market value of available-for-sale financial instruments 78.2 -1.3

Deferred taxes on reserve for available-for-sale financial instruments 0.2

Share of other income from financial investments accounted for under the equity method -6.9 6.4

Total income and expenses recognised directly in equity with future reclassification affecting result 68.6 -47.0

Other comprehensive income after taxes -2.2 -49.3

Comprehensive income after taxes 16.0 119.8

Of this:

Attributable to the parent company 15.1 120.6

Attributable to minority interests 0.9 -0.8

16.0 119.8


Assets

EUR million Note 30.06.2014 31.12.2013

Non-current assets

Intangible assets 992.7 1,000.1

Property, plant and equipment 5,199.7 5,233.4

Investment property 10.5 11.5

Investments accounted for under the equity method 846.4 882.4

Other financial assets 14 261.6 191.6

Income tax receivables 4.0 5.4

Other non-financial assets 3.0 3.1

Deferred taxes 104.1 71.9

7,422.0 7,399.4

Current assets

Inventories 291.1 411.7

Trade receivables 14 832.2 1,220.1

Other financial receivables and assets 14 362.3 437.4

Income tax receivables 12.9 15.7

Other non-financial receivables and assets 131.9 127.7

Cash and cash equivalents 13, 14 1,075.1 727.2

2,705.5 2,939.8

Non-current assets held for sale 31.2

2,705.5 2,971.0

Total assets 10,127.5 10,370.4

Balance sheet for the EWE Groupas of 30 June 2014


Equity and liabilities

EUR million Note 30.06.2014 31.12.2013

Shareholders’ equity

Subscribed capital 243.0 243.0

Capital reserve 1,619.2 1,609.5

Accumulated income 655.7 726.0

Comprehensive other income -201.9 -199.2

Equity attributable to shareholders of the parent company 2,316.0 2,379.3

Attributable to minority interests 17.4 16.4

2,333.4 2,395.7

Non-current liabilities

Construction subsidies 715.0 722.8

Provisions 12 1,890.4 1,763.7

Bonds 14 1,770.2 1,768.3

Liabilities to banks 14 311.2 585.4

Other financial liabilities 14 97.1 84.0

Income tax liabilities 0.9

Other non-financial liabilities 13.9 13.1

Deferred taxes 328.8 363.5

5,126.6 5,301.7

Current liabilities

Construction subsidies 51.6 51.4

Emissions rights 12.6 8.0

Provisions 117.2 146.0

Bonds 14 642.6 642.3

Liabilities to banks 14 374.5 144.4

Trade payables 14 702.7 990.7

Other financial liabilities 14 569.4 483.4

Income tax liabilities 56.0 47.5

Other non-financial liabilities 140.9 139.7

2,667.5 2,653.4

Liabilities related to held-for-sale assets 19.6

2,667.5 2,673.0

Total equity and liabilities 10,127.5 10,370.4


Statement of changes in shareholders’ equity for the EWE Groupfor the period from 1 January to 30 June 2014

EUR million

Subscribed capital of the

EWE Group

Capital reserve of the

EWE GroupAccumulated

income COMPREHENSIVE OTHER INCOME

Equity attributable

to shareholders of the parent

company

Attributable to minority

interestsShareholders’

equity

Revaluation reserve in

accordance with IFRS 3

Reserve for cash flow hedges

Reserve for available-for-sale

financial instruments

Cumulative translation differences

Measurement of pension provisions

Change from equity valuation

without effect on profit and loss

As of 1.1.2013 243.0 1,609.5 758.4 74.5 -2.5 16.9 -42.1 -195.3 -8.4 2,454.0 13.2 2,467.2

Result for the period 167.9 167.9 1.2 169.1

Other comprehensive income -35.0 -1.3 -15.1 -2.3 6.4 -47.3 -2.0 -49.3

Total result 120.6 -0.8 119.8

Dividend payments -88.0 -88.0 -0.2 -88.2

As of 30.6.2013 243.0 1,609.5 838.3 74.5 -37.5 15.6 -57.2 -197.6 -2.0 2,486.6 12.2 2,498.8

As of 1.1.2014 243.0 1,609.5 726.0 74.5 -12.1 14.7 -77.0 -199.2 -0.1 2,379.3 16.4 2,395.7


Other comprehensive income -6.2 78.4 2.8 -70.8 -6.9 -2.7 0.5 -2.2

Total result 15.1 0.9 16.0

Capital increase 9.7 9.7 9.7


Other changes -0.1 -0.1 0.4 0.3

As of 30.6.2014 243.0 1,619.2 655.7 74.5 -18.3 93.1 -74.2 -270.0 -7.0 2,316.0 17.4 2,333.4


EUR million

Subscribed capital of the

EWE Group

Capital reserve of the

EWE GroupAccumulated

income COMPREHENSIVE OTHER INCOME

Equity attributable

to shareholders of the parent

company

Attributable to minority

interestsShareholders’

equity

Revaluation reserve in

accordance with IFRS 3

Reserve for cash flow hedges

Reserve for available-for-sale

financial instruments

Cumulative translation differences

Measurement of pension provisions

Change from equity valuation

without effect on profit and loss

As of 1.1.2013 243.0 1,609.5 758.4 74.5 -2.5 16.9 -42.1 -195.3 -8.4 2,454.0 13.2 2,467.2


Other comprehensive income -35.0 -1.3 -15.1 -2.3 6.4 -47.3 -2.0 -49.3

Total result 120.6 -0.8 119.8


As of 30.6.2013 243.0 1,609.5 838.3 74.5 -37.5 15.6 -57.2 -197.6 -2.0 2,486.6 12.2 2,498.8

As of 1.1.2014 243.0 1,609.5 726.0 74.5 -12.1 14.7 -77.0 -199.2 -0.1 2,379.3 16.4 2,395.7


Other comprehensive income -6.2 78.4 2.8 -70.8 -6.9 -2.7 0.5 -2.2

Total result 15.1 0.9 16.0

Capital increase 9.7 9.7 9.7


Other changes -0.1 -0.1 0.4 0.3

As of 30.6.2014 243.0 1,619.2 655.7 74.5 -18.3 93.1 -74.2 -270.0 -7.0 2,316.0 17.4 2,333.4


EUR millionSee Notes,

Note 1301.01. –

30.06.201401.01. –

30.06.2013

EBIT 1 139.8 360.0

Depreciation, amortisation and impairment 210.7 252.4

Reversals of depreciation, amortisation and impairment -5.3

Reversal of construction subsidies -35.7 -30.2

Interest paid -30.1 -24.4

Interest received 21.5 8.6

Income tax payments / rebates -45.4 -60.5

Net gain / loss on disposal of non-current assets -0.5 4.5

Non-cash changes in provisions 27.2 52.0

Changes from equity valuation 29.9 -42.8

Net non-cash gain / loss from derivative financial instruments 62.8 -7.2

Other non-cash income and expenses -2.2 -0.3

Changes in inventories 120.7 75.2

Changes in receivables and other assets 472.0 -210.7

Changes in liabilities -419.7 -196.7

Cash flow from operating activities 545.7 179.9

Construction subsidies received 19.8 20.2

Proceeds from disposal of intangible assets 0.7

Expenditure for investments in intangible assets -4.9 -4.1

Proceeds from disposal of property, plant and equipment 27.8 35.7

Expenditure for investments in property, plant and equipment -144.8 -251.9

Proceeds from disposal of financial assets 23.8 10.1

Expenditure for investment in financial assets -6.5 -16.2

Cash flow from investing activities -84.1 -206.2

Proceeds from issuing equity instruments 9.7

Dividend payments to shareholders of the parent company and minority shareholders -88.3 -88.2

Inflows / outflows for financial liabilities (net) -38.9 -10.9

Other net cash flow from / for financing activities 2.1 0.6

Cash flow from financing activities -115.4 -98.5

Change in cash and cash equivalents 346.2 -124.8

Changes in cash and cash equivalents due to change in exchange rates and in the group of consolidated companies 2.3 -5.5

Cash and cash equivalents at the beginning of the period 729.7 848.2

Cash and cash equivalents at the end of the reporting period 1,078.2 717.9

1 Earnings before interest and taxes

Cash flow statement for the EWE Groupfor the period from 1 January to 30 June 2014 / Source of funds (+), use of funds (-)


Notes to the abridged interim consolidated financial statements for EWE

1. Information about the company

EWE Aktiengesellschaft (hereafter EWE AG) with registered offices in 26122 Oldenburg (Germany), Tirpitzstrasse 39, is the parent company of the EWE Group.

These abridged interim consolidated financial statements for the first half-year 2014 were approved by the Board of Management for presentation to the Supervisory Board on 12 August 2014.

The abridged interim consolidated financial statements and the Group interim management report have been subjected to an auditor’s review.

2. Principles of preparing the financial statements and accounting methods

The abridged interim consolidated financial statements for the first half-year 2014 have been prepared in accordance with the International Financial Reporting Standards (IFRS) as applicable in the EU. As per IAS 34, these do not include all the information and disclosures required for year-end consolidated financial statements and should therefore be read in conjunction with the consolidated financial state-ments as of 31 December 2013.

The manner in which certain circumstances have been reported has been subjected to minor changes. The corresponding information from the previous year has been adjusted.

Rounding in the interim report may result in minor variations in totals and percentages.

Main accounting methods

For the preparation of the abridged interim consolidated financial statements, the accounting meth-ods used to prepare the consolidated financial statements as of 31 December 2013 have been applied in unchanged form. The following standards and interpretations, which are mandatory for the first time, are the only exception:

IAS 27 Separate Financial Statements (revised 2011):As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and shareholdings in a company’s separate financial state-ments. The Group does not prepare separate financial statements in this manner. This standard had no effect on the consolidated financial statements of the EWE Group.


IAS 28 Investments in Associates and Joint Ventures (revised 2011):As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed “Investments in Associates and Joint Ventures” and describes the application of the equity method to investments in joint ven-tures, which was previously restricted solely to associates. This standard had no effect on the consoli-dated financial statements of the EWE Group.

IFRS 10 Consolidated Financial Statements:IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation – Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management under current legislation to exercise significant judgement to determine which entities are controlled and whether they are therefore required to be included in the group of consolidated companies in the consolidated financial statements. The application of the standard required no changes to be made to the group of consolidated companies.

IFRS 11 Joint Arrangements:IFRS 11 replaces IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non- Monetary Contributions by Venturers”. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, these companies must be accounted for using the equity method in future. The first-time application did not have any effect on the consoli-dated financial statements of the EWE Group.

IFRS 12 Disclosure of Interests in Other Entities:This standard regulates all of the disclosures related to consolidated financial statements and consoli-dates all of the disclosures for subsidiaries. These disclosure obligations were previously regulated in IAS 27. The standard also regulates disclosures regarding jointly controlled entities and shareholdings which were previously governed by IAS 31 and IAS 28, as well as structured entities. A number of new disclosures are also required. The standard resulted in additional disclosures in EWE’s consolidated financial statements.

IFRIC 21 Levies:The interpretation states that a company which becomes active in a particular market is then obliged to recognise a liability for the levies due to the authorities responsible for this market if the business activity causing the levy in question takes place. In the case of a levy which depends on achieving a min-imum threshold, for instance, the interpretation clearly states that a liability may be recognised in the balance sheet only when this minimum threshold has been reached. Applying the interpretation did not have any effect on EWE’s consolidated financial statements.

3. Group of consolidated companies

The consolidated financial statements include EWE AG as well as all significant domestic and foreign subsidiaries controlled directly or indirectly by EWE AG. Significant associated companies are recorded using the equity method.


The following table shows the group of consolidated companies:

Type of consolidation and number 30.06.2014 31.12.2013 30.06.2013

Fully consolidated companies 57 54 48

Companies accounted for under the equity method 12 12 10

The increase in the number of fully consolidated companies is the result of reorganisation within the Group.

Consolidation takes place on the basis of the interim financial statements for EWE AG and the financial statements of the consolidated companies as of 30 June 2014, which are prepared using uniform ac-counting principles.

4. Segment information

The segments in the EWE Group are determined in accordance with internal reporting approaches. This is referred to as the “management approach”. In order to ideally meet the expectations imposed upon a multi-service company within the context of the energy turnaround, reporting is carried out for each segment separately in line with the value chain.

EWE’s segments are as follows:

• Generation• Infrastructure• Sales and Trading• International and IT• Central Divisions/Consolidation

The ‘Generation’ segment will combine conventional generation and renewable energies with disposal and gas storage.

The ‘Infrastructure’ segment encompasses not only the electricity grid, natural gas grid and telecom-munications networks but also the water and wastewater business and real estate holdings.

The energy and telecommunications sales operations have been combined with the Energy Trading division to form the segment ‘Sales and Trading’.

All other segments have been combined in accordance with IFRS 8.16 and disclosed as the ‘Interna-tional and IT’ segment. This includes the business units in Turkey and Poland as well as the Informa-tion Technology division.

The Central Divisions/Consolidation segment is responsible for the head office functions of EWE AG as a holding company as well as EWE AG’s direct shareholdings and Group-wide consolidation. The shares held in VNG and measured using the equity method are also reported in this segment.


EUR million Generation Infrastructure

01.01. – 30.06.2014

01.01. – 30.06.2013

01.01. – 30.06.2014

01.01. – 30.06.2013

Sales

External sales 192.9 192.2 984.1 833.8

Inter-segment sales 201.6 263.8 460.2 510.7

Total sales 394.5 456.0 1,444.3 1,344.5

Result

Segment result (operating EBIT) 45.9 47.3 137.5 239.9

Other information

Segment assets 2,435.3 2,386.2 3,512.5 3,779.2

Cash paid for investments 45.7 181.5 64.9 63.6

Average number of employees 768.5 776.5 2,524.5 2,532.0

Segment information for the EWE Group

EUR million Sales and Trading International and IT

01.01. – 30.06.2014

01.01. – 30.06.2013

01.01. – 30.06.2014

01.01. – 30.06.2013

Sales

External sales 2,567.0 3,138.8 402.6 496.1

Inter-segment sales 205.8 271.5 45.7 46.7

Total sales 2,772.8 3,410.3 448.3 542.8

Result

Segment result (operating EBIT) 36.3 52.1 7.7 14.1

Other information

Segment assets 1,756.6 2,521.6 538.6 616.8

Cash paid for investments 27.1 32.4 9.5 10.0

Average number of employees 2,508.5 2,575.5 2,372.0 2,377.5


The operating EBIT can be reconciled as follows to earnings before taxes (EBT):


30.06.201401.01. –

30.06.2013

Operating EBIT 186.5 377.6

Effect of derivative valuations -48.2 5.8

Impairment charges against (non-operating) property, plant and equipment -1.2 -1.4

Effect from the disposal of property, plant and equipment 2.7 -22.0

EBIT 139.8 360.0

Interest income 21.7 8.6

Interest expense -117.1 -106.4

EBT 44.4 262.2

5. Sales

Sales are initially presented as gross sales including the electricity and energy taxes. Sales include electricity and energy taxes invoiced to customers in the amount of € 195.4 million (30.06.2013: € 225.4 million). Net sales are the sales after deducting the electricity and energy taxes.

Net sales include amounts reimbursed to transmission network operators from feed-ins in accordance with the Renewable Energy Act (EEG) totalling € 713.3 million (30.06.2013: € 548.1 million). Corre-spondingly, the original payments for feed-ins in accordance with the EEG are recognised under cost of materials and services in a similar amount.

EUR millionCentral Divisions/

Consolidation Group

01.01. – 30.06.2014

01.01. – 30.06.2013

01.01. – 30.06.2014

01.01. – 30.06.2013

Sales

External sales 1.3 1.2 4,147.9 4,662.1

Inter-segment sales -913.3 -1,092.7

Total sales -912.0 -1,091.5 4,147.9 4,662.1

Result

Segment result (operating EBIT) -40.8 24.2 186.5 377.6

Other information

Segment assets 605.1 -118.8 8,848.1 9,184.9

Cash paid for investments 9.0 -15.4 156.2 272.1

Average number of employees 1,058.5 890.5 9,232.0 9,152.0


6. Other operating income

The other operating income increased compared to the previous year, which is primarily the result of higher income from derivative financial instruments and underlying transactions in the Energy segment recognised in the balance sheet.

7. Other operating expenses

The increase in other operating expenses compared with the same period a year ago were influenced primarily by derivative financial instruments.

8. Result of investments accounted for under the equity method

The decline in the result from investments accounted for using the equity method is due to a substan-tially lower half-year result at VNG – Verbundnetz Gas AG, Leipzig.

9. Other investment income

The other investment income for the corresponding prior-year period includes expenditure of € 22.0 million incurred through the disposal of shares in non-consolidated shareholdings.

10. Income taxes

Income taxes fell by € 66.9 million to € 26.2 million as a result of higher deferred tax assets and lower deferred tax expenses – in the same period last year deferred tax assets in the amount of € 36.0 mil-lion were subjected to value adjustment.

11. Dividend decided upon and paid

On 5 May 2014, the EWE AG Annual General Meeting resolved to distribute the proposed dividend for the financial year 2013, amounting to € 88,000,534.08 (€ 362.16 for each nominal € 1,000.00 of share capital amounting to € 242,988,000.00), to the shareholders. The dividend was paid to shareholders in the first half of the year.

12. Pension provisions

The provisions for pensions and similar obligations bear interest at a rate of 3.0 per cent (31.12.2013: 3.50 per cent).

13. Cash flow statement

Cash and cash equivalents consist of the balance sheet item cash and cash equivalents, amounting to € 1,075.1 million (30.06.2013: € 715.6 million), and cash pool receivables of € 3.1 million (30.06.2013: € 2.2 million).

14. Additional disclosures on financial instruments

The carrying amounts and fair value amounts of the financial assets and financial liabilities are shown below. Fair value is measured solely on a recurring basis.


Carrying amounts, basis of recognition and fair values according to measurement categories

EUR million

Measure-ment cat-

egory under IAS 39

Carrying amount

30.06.2014 BASIS OF RECOGNITION UNDER IAS 39Fair value

30.06.2014

Amortised costs

Acquisitioncosts

Fair value without

effect on profit and loss

Fair value through

profit and loss

Assets

Other non-current assets

Loans and receivables LaR 63.2 63.2 63.2

Shares AfS 174.9 1.2 173.7 174.9

Trade receivables LaR 832.2 832.2 832.2

Other receivables and assets

Securities AfS 115.8 115.8 115.8

Other financial assets LaR 172.5 172.5 172.5

Securities FAHfT 10.0 10.0 10.0

Cash and cash equivalents LaR 1,075.1 1,075.1 1,075.1

Derivatives

outside hedging relationships FAHfT 40.7 40.7 40.7

in a hedging relationship n. a. 46.8 46.8 46.8


Bonds FLAC 2,412.8 2,412.8 2,768.4

Liabilities to banks FLAC 685.7 685.7 706.1

Trade payables FLAC 702.7 702.7 702.7

Other liabilities FLAC 403.8 403.8 403.8

Derivatives

outside hedging relationships FLHfT 103.6 103.6 103.6


Of which aggregated by measurement category as per IAS 39:

Loans and receivables (LaR) 2,143.0 2,143.0 2,143.0

Available-for-sale financial assets (AfS) 290.7 1.2 289.5 290.7

Financial assets held for trading (FAHfT) 50.7 50.7 50.7

Financial liabilities measured at amortised cost (FLAC) 4,205.0 4,205.0 4,581.0

Financial liabilities held for trading (FLHfT) 103.6 103.6 103.6


Carrying amounts, basis of recognition and fair values according to measurement categories

EUR million

Measure-ment cat-

egory under IAS 39

Carrying amount

31.12.2013 BASIS OF RECOGNITION UNDER IAS 39Fair value

31.12.2013

Amortised costs

Acquisitioncosts

Fair value without

effect on profit and loss

Fair value through

profit and loss

Assets

Other non-current assets

Loans and receivables LaR 78.7 78.7 78.8

Shares AfS 101.8 51.5 50.3 101.8

Trade receivables LaR 1,220.1 1,220.1 1,220.1

Other receivables and assets

Securities AfS 146.9 146.9 146.9

Other financial assets LaR 212.6 212.6 212.7

Securities FAHfT 7.6 7.6 7.6

Cash and cash equivalents LaR 727.2 727.2 727.2

Derivatives

outside hedging relationships FAHfT 26.4 26.4 26.4



Bonds FLAC 2,410.6 2,410.6 2,675.9

Liabilities to banks FLAC 729.8 729.8 768.1

Trade payables FLAC 990.7 990.7 990.7

Other liabilities FLAC 381.4 381.4 381.4

Derivatives

outside hedging relationships FLHfT 45.3 45.3 45.3


Of which aggregated by measurement category as per IAS 39:

Loans and receivables (LaR) 2,238.6 2,238.6 2,238.8

Available-for-sale financial assets (AfS) 248.7 51.5 197.2 248.7

Financial assets held for trading (FAHfT) 34.0 34.0 34.0

Financial liabilities measured at amortised cost (FLAC) 4,512.5 4,512.5 4,816.1

Financial liabilities held for trading (FLHfT) 45.3 45.3 45.3


The fair value is the price that would be obtained or paid upon disposal of an asset or upon transfer of a liability within the context of an ordinary transaction between market participants as at the meas-urement date.

Available-for-sale financial assets concern securities and non-consolidated shareholdings that are not traded on an active market. The fair value of unlisted equity instruments is generally calculated using the discounted cash flow method. Unlisted equity instruments whose fair value could not be reliably measured due to a lack of sufficiently recent plan data are measured at cost. There was no intention to dispose of these instruments as of the balance sheet date.

Trade receivables, other receivables and assets as well as cash and cash equivalents have short resid-ual maturities. Their carrying amounts on the reporting date are therefore generally equal to fair value. The maximum default risk is the carrying amount of the assets recognised in the balance sheet.

The fair values of derivative financial instruments are dependent on movements in the underlying mar-ket factors. The relevant fair values are measured and monitored at regular intervals.

These derivative instruments are governed by conventional offsetting agreements. Derivative trans-actions are generally conducted on the basis of standard agreements which enable the netting of all outstanding transactions with transaction partners.

Interest rate swaps, currency futures contracts and options, coal swaps, gas price hedging contracts (swaps) and CO₂ forwards are valued using the standard market valuation method with maximum consideration given to observable market data such as currency spot and futures rates, yield curves and hourly price forward curves.

Listings on active markets are used as a reference for the valuation of commodity derivatives. If there are no listings available, for example because the market is not liquid enough, the fair values are calcu-lated on the basis of recognised valuation models. When available, trades that are identical to stock exchange transactions on the over-the-counter market are rated based on the published closing rates of that stock exchange. The fair values of products not traded on stock exchanges are determined on the basis of publicly available broker quotes, assuming they are available. If they are not, generally ac-cepted valuation methods for which internal data is acquired are applied instead. The risk of default is established. Energy deals conducted as part of commodity transactions are generally subject to EFET agreements (European Federation of Energy Traders). Risks of default are accounted for by taking net-ting agreements into consideration.

The credit and debit value adjustment (CVA / DVA) produced a derivative income of minor significance.

Even on the assumption that legally controversial netting agreements are not enforceable, the CVA / DVA would have no material impact on the income statement.

The fair value of publicly listed bonds is equal to the nominal amount multiplied by the quoted price on the reporting date.


The fair value of other fixed-rate bonds not traded on stock exchanges or fixed-rate liabilities to banks is determined as the present value of debt-related payments based on the relevant interest rate curve. With floating-rate liabilities to banks, it is assumed that the carrying amount will fundamentally corre-spond to the fair value due to the regularity of adjustments made to the interest rates on the basis of current market parameters.

Trade payables and other liabilities mostly have short maturities and the carrying amounts are there-fore generally equivalent to fair value.

The following table allocates financial instruments measured at fair value to the three levels of the fair-value hierarchy:

EUR million 30.06.2014

Level 1 Level 2 Level 3 Total

Financial assets held at fair value

Shares 173.7 173.7

Securities 125.1 0.7 125.8

Derivative financial instruments 67.6 19.9 87.5

Total 125.1 68.3 193.6 387.0

Financial liabilities held at fair value


Total 242.0 20.7 262.7

EUR million 31.12.2013

Level 1 Level 2 Level 3 Total

Financial assets held at fair value

Shares 50.3 50.3

Securities 154.0 0.5 154.5


Total 154.0 76.9 55.3 286.2

Financial liabilities held at fair value


Total 176.5 9.5 186.0


These fair-value hierarchy levels are described below:

Level 1: Quoted prices (unadjusted) on active markets for identical assets or liabilities.

Level 2: Information other than quoted market prices that is observable directly (e.g. prices) or indirectly (e.g. derived from prices).

Level 3: Information on assets or liabilities that is not based on observable market data.

At the end of any reporting period, a review is conducted to determine if there is reason to reclassify instruments into or out of a valuation level. During the reporting period to 30 June 2014, there were no reclassifications between fair value measurements in levels 1 and 2, nor were there any reclassifi-cations into or out of fair value measurements in level 3.

The following table gives an overview of financial instruments allocated to fair value level 3:

EUR millionShares

(assets)

Derivative financial instruments

(assets)


(liabilities)

As of 1.1.2014 50.3 5.0 9.5

Other operating income and other operating expenses in income statement 14.9 11.2

Other investment income in income statement (market value of available-for-sale financial instruments) -1.5

Other comprehensive income (market value of available-for-sale financial instruments) 78.8

Reclassifications 46.1

As of 30.6.2014 173.7 19.9 20.7

EUR millionShares

(assets)


(assets)


(liabilities)

As of 1.1.2013 50.3 5.8

Other operating income and other operating expenses in income statement 2.4 0.9

Transfers in level 3 2.6 2.8

As of 31.12.2013 50.3 5.0 9.5

The fair values of shares classified in level 3 are calculated with the help of the discounted cash flow method based on planning figures from several periods for the cash flows to be discounted and assum-ing sustainable terminal value. This category includes non-publicly-listed equity instruments with fair values that can be determined with a sufficient degree of reliability. A hypothetical change of + / - 1 per cent in the WACC as of the balance sheet date would lead to a theoretical reduction of the fair values by € 32.7 million (31.12.2013: reduction by € 11.7 million) or to a rise by € 52.6 million (31.12.2013: rise by € 19.1 million). A hypothetical change of + / - 10 per cent in the EBIT as of the balance sheet date would lead to a theoretical increase of the fair values by € 17.8 million (31.12.2013: increase by


€ 6.1 million) or to a decline by € 17.3 million (31.12.2013: decline by € 5.6 million).

Level 3 derivative financial instruments as at 30 June 2014 include gas contracts which also concern trading periods for which there are still no active markets. This affects oil price-linked gas contracts in particular, the valuation of which is partly dependent on future changes in wholesale market prices for gas and oil. When gas prices rise or oil prices fall, and other factors remain the same, the market price of these procurement contracts rises. On the other hand, this hierarchy includes energy supply contracts containing price formulas in which at least one of the components is not observed directly in the market.

15. Related party disclosures

Transactions with companies included in the interim consolidated financial statements are eliminated as part of consolidation. The following table shows the total value of transactions with related companies in the first half-year of 2014 and 2013 and the outstanding balances of transactions with related com-panies as of 30 June 2014 and 31 December 2013:

EUR million

Disposals to related

companies

Acquisitions from related

companies

Receivablesfrom related

companies

Liabilitiesto related

companies

Shareholders of / investors in EWE AG

2014 27.1 45.6 1.4 1.0

2013 47.5 47.5 3.6 0.1

Associated companies accounted for using the equity method and according to companies accounted under IFRS 5

2014 45.7 90.3 6.4 9.5

2013 114.7 127.4 6.1 8.4

The members of Ems-Weser-Elbe Versorgungs- und Entsorgungsverband are the local authorities and municipalities in our supply area between the rivers Ems, Weser and Elbe. They are supplied with elec-tricity, gas, and telecommunications and information services on standard market terms.

The EWE Group concluded no significant transactions with related individuals. The supply of electrici-ty, natural gas and telecommunications services to related parties takes place on arm’s length terms.


Information on the Boards of EWE AG

Supervisory Board

Dr. Stephan-Andreas Kaulvers Chief Executive Officer Chairman of the Board of Management of Bremer Landesbank,

Bremen

Rainer Janßen First Deputy Chairperson Chairperson of Central Works Council, EWE AG, Varel

Dr. Frank Mastiaux Second Deputy Chairperson Chairman of the Board of Management at EnBW AG, Düsseldorf

Hans Eveslage Third Deputy Chairperson

District Administrator of Cloppenburg, Barßel

Bernhard Bramlage Fourth Deputy Chairperson District Administrator of Leer district, Leer

Wolfgang Behnke Systems Integrator at EWE VERTRIEB GmbH, Osterholz-Scharmbeck

Stefan Brok Chairman of the Board of Management at Aral Aktiengesellschaft, Gronau, since 04.03.2014

Eckhard Dibke Works Council member at wesernetz Bremerhaven GmbH, Langen

Gregor Heller Senior Trades Consultant at EWE VERTRIEB GmbH, Haselünne

Jürgen Humer District secretary of ver.di district Weser-Ems, Oldenburg

Aloys Kiepe ver.di District Trades Secretary, Emden

Peter Marrek Chairman of the Works Council at swb AG, Wilhelmshaven

Peter Meiwald Elected representative on Ammerland District Council, Westerstede-Moorburg

Immo Schlepper Regional Department Head, ver.di Niedersachsen-Bremen, Bremen

Ulrike Schlieper SPD group leader on Friesland District Council, Sande

Heiner Schönecke Member of the Lower Saxony State Parliament, Neu Wulmstorf

Prof. Dr. Gerd Schwandner Mayor of the City of Oldenburg, Oldenburg


Richard Venning Chairman of the Works Council at EWE TEL GmbH, Spenge

Thomas Windgassen Director of the EWE Business Region Cuxhaven / Delmenhorst, Cuxhaven

Dr. Hans-Josef Zimmer Member of the Board of Management at EnBW AG, Steinfeld (Rhineland-Palatinate)

Board of Management

Dr. Werner Brinker Chief Executive Officer of EWE AG, Rastede

Nikolaus Behr Member of the Board of Management at EWE AG, Human Resources, Oldenburg

Matthias Brückmann Member of the Board of Management at EWE AG, Sales, Rastede

Dr. Torsten Köhne Member of the Board of Management at EWE AG, Generation, Bremen

Dr. Heiko Sanders Member of the Board of Management at EWE AG, Finance, Wiesmoor

16. Events after the reporting date

There were no significant events after the reporting date.


Board of Management



Nikolaus Behr


Confirmation by the legal representativesWe confirm that, to the best of our knowledge and in accordance with the applicable accounting stand-ards for interim reports, the consolidated interim financial statements give a true and fair view of the assets, financial and earnings position of the Group and that the Group interim management report presents the course of business, earnings and the Group’s situation in a true and fair way and that the main risks and opportunities of the Group’s expected future development are described.


Board of Management



Nikolaus Behr


Certificate of auditors’ review

To EWE Aktiengesellschaft

We have carried out a review of the abridged interim consolidated financial statements – consisting of the income statement, statement of comprehensive income, balance sheet, statement of changes in shareholders’ equity and cash flow statement as well as selected comments in the Notes to the abridged consolidated financial statements – and the interim Group management report of EWE Aktiengesellschaft, Oldenburg for the period 1 January 2014 to 30 June 2014, which are part of the half-year financial report as defined in Section 37w of the Securities Trading Act (WpHG). The prepa-ration of the abridged interim consolidated financial statements in accordance with the IFRS for interim financial reporting as applicable in the EU and the interim Group management report in accordance with the provisions of the Securities Trading Act (WpHG) applicable to interim Group management reports is the responsibility of the company’s Board of Management. Our responsibility is to issue a certificate on the abridged interim consolidated financial statements and the interim Group manage-ment report on the basis of our review.

We conducted our review of the abridged interim consolidated financial statements and the interim Group management report in accordance with generally accepted German standards for the auditors’ review of financial statements as determined by the German Institute of Auditors (Institut der Wirtschaftsprüfer, IDW). These standards require that we plan and conduct the review such that after critical appraisal we can with a certain assurance exclude the possibility that the abridged interim con-solidated financial statements do not comply with the IFRS for interim financial reporting as applica-ble in the EU in significant respects and that the interim Group management report does not comply with the provisions of the Securities Trading Act applicable to interim Group management reports. An auditors’ review is essentially limited to questioning employees of the company and making analytical judgements and therefore does not offer the same level of assurance as an audit. As we were not ap-pointed to carry out an audit, we cannot provide an auditors’ report.

Based on our auditors’ review, we have not become aware of any circumstances that would give us reason to believe that there are significant cases where the abridged interim consolidated financial statements do not comply with the IFRS for interim financial reporting as applicable in the EU or that there are significant cases where the interim Group management report does not comply with the pro-visions of the Securities Trading Act applicable to interim Group management reports.

Bremen, Germany, 13 August 2014

Ernst & Young GmbHWirtschaftsprüfungsgesellschaft

Boelsems HantkeAuditor Auditor


Calendar 2015

23 April 2015 Annual Report 2014 – Press conference

27 August 2015 Interim Report 2015

Published byEWE AktiengesellschaftTirpitzstrasse 3926122 OldenburgGermany

Editorial teamEWE AktiengesellschaftCorporate CommunicationsPhone: +49 (0) 4 41 / 48 05-18 30E-mail: [email protected]

Concept and designIR-One AG & Co., Hamburgwww.ir-1.com

Picture creditsStephan Meyer-Bergfeld, OldenburgEWE picture library

Printed byZertani GmbH & Co. Die Druckerei KG, Bremen

Imprint

This interim report contains for-ward-looking statements based on assumptions and estimates by the management of EWE AG. Although company management believes that these assumptions and estimates are accurate, future developments and actual future results may differ con-siderably from these assumptions and estimates due to a wide variety of factors. These factors may include

changes in the general economic situ-ation, in the statutory and regulatory framework for Germany and the EU, and in the sector. EWE AG is neither liable for, nor guar antees that future developments and the actual results achieved in future will coincide with the assumptions and estimates made in this interim report. EWE AG neither intends nor assumes any obligation to update forward-looking statements to

reflect events or developments after the date of this interim report.

This interim report also exists in Ger-man; in the event of any divergences,the German version of the interimreport has precedence over the Englishversion. Both language versions are available for download from http://www.ewe.de.

Disclaimer

Translated byEnglishBusiness, Hamburg

EWE on the internetwww.ewe.com

EWE AktiengesellschaftTirpitzstrasse 39, 26122 Oldenburgwww.ewe.com

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