strong fundamentals despite regulatory risks...throes of deregulation and subject to intense...

Strong fundamentalsdespite regulatory risks

DrKW Investor ConferenceNew YorkJanuary 9, 2007

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Peter Terium, Ingo Alphéus | DrKW Conference, New York | January 9, 2007

Forward Looking Statement

* Footnotes are to be inserted manually (using “copy” and “paste“).

This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements:

Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;Statements of plans or objectives for future operations or of future competitive position;Expectations of future economic performance; andStatements of assumptions underlying several of the foregoing types of statements

are forward-looking statements. Also words such as “anticipate”, “believe”, “estimate”, “intend”, “may”, “will”, “expect”, “plan”, “project”“should” and similar expressions are intended to identify forward-looking statements. The forward-looking statements reflect the judgement of RWE’s management based on factors currently known to it. No assurances can be given that these forward-looking statements will prove accurate and correct, or that anticipated, projected future results will be achieved. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Such risks and uncertainties include, but are not limited to, changes in general economic and social environment, business, political and legalconditions, fluctuating currency exchange rates and interest rates, price and sales risks associated with a market environment in the throes of deregulation and subject to intense competition, changes in the price and availability of raw materials, risks associated with energy trading (e.g. risks of loss in the case of unexpected, extreme market price fluctuations and credit risks resulting in the event that trading partners do not meet their contractual obligations), actions by competitors, application of new or changed accounting standards or other government agency regulations, changes in, or the failure to comply with, laws or regulations, particularly those affecting the environment and water quality (e.g. introduction of a price regulation system for the use of power grid, creating a regulation agency for electricity and gas or introduction of trading in greenhouse gas emissions), changing governmental policies and regulatory actions with respect to the acquisition, disposal, depreciation and amortization of assets and facilities, operation and construction of plant facilities, production disruption or interruption due to accidents or other unforeseen events, delays in the construction of facilities, the inability to obtain or to obtain on acceptable terms necessary regulatory approvals regarding future transactions, the inability to integratesuccessfully new companies within the RWE Group to realise synergies from such integration and finally potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation. Any forward-looking statement speaks only as of the date on which it is made. RWE neither intends to nor assumes any obligation to update these forward-looking statements. For additional information regarding risks, investors are referred to RWE’s latest annual report and to other most recent reports filed with Frankfurt Stock Exchange or SWX Swiss Exchange and to the material furnished to the US Securities and Exchange Commission by RWE.

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Investment Plans and Growth

Peter TeriumManaging Director, RWE TradingMember of the Group Business Committee

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Forward selling of RWE Power in the German market (baseload forwards in €/MWh)

01/01/2004 07/01/2004 01/01/2005

>1% sold

01/01/2006

36322824

4044485256

07/01/2005

36322824

404448525660

6064

64

as of01/01//2007

07/01/2006

German power market: Prudent forward sellingsecures profit growth in NAP 1 period and beyond

Performance

36322824

40444852566064

Forward 2007

Forward 2008

Forward 2009

>10% sold >95% sold

>60% sold

>35% sold >55% sold

>10% sold>1% sold

>90% sold

>45% sold

>20% sold>10% sold

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We aim to grow our European energy business along the value chain

Good returns

Organic growth

Overheatedmarket

Leverage corestrengthPrivatizations

Advanced assetoptimisationIncreasing market

Outperformance

Expand customerbasePrivatizations

OverbuildingCO2

Margin reduction

Regulation

Upstreamoil and gas

Generation

Trading

Transmission

Distribution

Sales

Intensifiedcompetition

Strategy

Opportunities Risks Aspiration

Kick-off LNG

Strengthen gas

6


Our geographic focus is Europe

U.K.

GermanyPoland

Czech Republic

Austria Hungary

NL

Slovakia

UK:Strengthen position as top tier power and gas player

Germany:Strengthen gas position to com-plement power

Netherlands:Become a leading gas and power company

Eastern Europe:Expand existing CEE1 positions (and selectively occupy positions in SEE2)

European Gas:Expand pipeline and storage business, se-cure access to LNG3

1 CEE = Central Eastern Europe2 SEE = South Eastern Europe3 LNG = Liquefied Natural Gas

Luxemb.

Strategy

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Recent initiatives for growth

U.K.

GermanyPoland

Czech Republic

AustriaHungary

NL

Slovakia

Luxemb.

South Eastern Europe

Interested in building a new power plant in Bulgaria (Maritsa)

Gate (LNG)

Entry into the regasi-fication market

Constructionof power plant (optional)

Entry into the Dutchgeneration market

Saar Ferngas

Expansion of downstreamgas position in Germany

Strategy

Plan for a new lignite-fired power station in Hungary (Mátra)

Central Eastern Europe

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We aim to further leverage our core strength:The monetization of asset optionalities in the power market

Strategy

Breakdown of generation capex Examples of initiatives

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2 Growth

Replacement

Growth initiatives

Replacement initiatives

Great Yarmouth (420 MW CCGT)Pembroke/Staythorpe (up to 2,000 MW CCGT)Renewables (ca. 700 MW) Customer IPPs (200 - 600 MW CCGTs)Netherlands (1,600 MW hard coal)

Neurath BoA 2/3 (2,100 MW lignite)Hamm (1,600 MW hard coal)Ensdorf (1,600 MW hard coal) (partly growth)Lingen (876 MW CCGT) (partly growth)Matra (400 MW lignite) (partly growth)

A

A

A

= Announced, final investment decision yet to be takenA

A

A

A

A

A

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Combination of all non-regulated midstream gas activities into a new company as first step in 2007:

- Procurement (wholesale)

- Non-regulated transport/transit

- LNG (commercial responsibility, business development)

- Storage (commercial optimization)

As European wholesale gas markets become more liquid, our second step will be to merge midstream gas with RWE Trading in order to create a fully integrated all-commodity midstream unit

Stefan Judisch appointed as CEO of the gas midstream company

Bundling of the Group’s gas midstream competencies

Strategy

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Strategy

Upstream oil & gas – competitive advantagein high price commodity markets

Germany

Great Britain

Portugal

Poland

Norway

AlgeriaLibya

Egypt UAE

Overview of RWE Dea activities

Highest ROCE within RWE Group

Financial hedge against fuel price volatility in power generation business and gas supply especially in UK

Diversification of our gasprocurement portfolio

Production activities exploration activities

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Strong production growth beyond 2009

RWE Dea – Reserves & S-Resources (P50)in million bbl oil equivalent – end of year status

RWE Dea – Gas and Oil Productionin thousand bbl oil equivalent/day

294

92

545

106

580

100426 423626

218 186 170

81

9

15

0

200

400

600

800

1000

1200

1400

Natural Gas Resources

Natural Gas Reserves

Kazakhstan Reserves + Resources

2005 2007e 2009e Outlook

Crude Oil Resources

Crude Oil Reserves

Dubai Reserves + Resources

1,200

800

400

0

729

406

968

292

1,206

270

Gas

Oil

Replacementrate > 100%

10

39

76

62

4946

602

10

0

20

40

60

80

100

Natural Gas

Crude Oil

Crude Oil Dubai

Crude Oil Kazakhstan

2005 2007e 2009e Outlook

CAGR: ~10%(2009-16)

Gas

Oil

Reserves = proved + probableResources = S1 + S2

Replacementrate = 100%

Strategy

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Update on Other Group Topics

Ingo AlphéusVice President Investor Relations

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Highlights 2006

Performance Q1 – Q3

Financial Position

Strategy / Portfolio

Outlook 2006

We expect a positive net financial position in the order of € 3 billion at year-end

Operating result + 15%; adjusted for deconsolidation and f/x effects + 16%Net profit + 23%Cost reduction: € 180 million out of € 230 million achieved

Thames Water sold to Kemble Water Ltd. for GBP 8 billion (€ 11.9 billion)American Water sale preparations continueBundling of the Group’s midstream gas competencies

Earnings guidance generally confirmed

Performance

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Sale of RWE Water Businesses

Thames Water Sale completedSale to Kemble Water Ltd, a consortium led by Macquarie’s EuropeanInfrastructure Funds completed 1 December 2006.

Sale price GBP 4.8 bn (€ 7.2 bn*), Implied enterprise value of GBP 8.0 bn(€ 11.9 bn*) including pro forma net debt of GBP 3.2 bn (€ 4.7 bn*)

Transaction will result in a book gain of approx. € 0.7 bn

Update on planned disposal of American WaterPetitions for regulatory approvals filed in 13 states – four approvals alreadyreceived

Set up of necessary corporate functions (refinancing, risk management andinternal control) on schedule

IPO expected in 2007

Strategy

* based on an exchange rate of GBP/EUR 0.67

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Electricity grid fee approvals

Munich

Berlin

Stuttgart

Frankfurt

Leipzig

Hamburg

Hanover

Saarbrücken Ludwigshafen

Augsburg

Dresden

Chemnitz

HalleEssen

Gelsenkirchen Dortmund

Osnabrück

Bad Kreuznach

RWE

Süwag

PfalzwerkeVSE

Koblenz

Kevag

LEW

enviaM

RWE

TSO ElectricityRWE Transportnetz StromGrid revenue € 1.0 bn/a

Region NorthRWE Westfalen-Weser-EmsGrid revenue € 0.8 bn/a

Region CentreRWE Rhein-RuhrGrid revenue € 1.3 bn/a

Region SouthwestSüwag Energie AGgrid revenue € 0.4 bn/a

Region WestenergisGrid revenue € 0.1 bn/a

-9%

Region EastenviaMgrid revenue € 0.6 bn/a

Region SouthLechwerkegrid revenue € 0.3 bn/a

Numbers before regulation

-12%

-12%

German Regulation

-10%

-11%

-14%

-13%

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Bad Kreuznach

Worms

Dettingen

Dortmund

Essen

Gas grid fee approvals

Region North

Region Centre

Region Southwest

RWE Westfalen-Weser-Emsgrid revenue € 0.15 bn/a

Süwag Energie AGgrid revenue € 0.05 bn/a

RWE Rhein-Ruhrgrid revenue € 0.1 bn/a

TSO GasRWE Transportnetz Gasgrid revenue € 0.2 bn/a

Halle

Frankfurt Region EastMitgasgrid revenue € 0.1 bn/a

All values before regulation

German Regulation

-26%

-14%

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Introduction of incentive regulation

regulatoryperiod

1(4 years)

revenue cap

2(4 years)

revenue cap

best practice (efficient costs)

reduction of inefficient TOTEX (OPEX andCAPEX): individual X

productivity of industry sector:general X

German Regulation

reduction of inefficient TOTEX (OPEX andCAPEX): individual X

Cost reduction for 2008 based on 2006 costs

01.01.2009

Starting pointincentive regulation

to be discussed

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Update on Emissions Trading: The new German National Allocation Plan (NAP II)

German NAP II was notified to the EU commission by end of June 2006. Key elements:

– Emission cap: 482 mil t p.a. from 2008-2012; compliance factor (cf) of 85% for existing plants in utility sector compared to emissions of base period; no auctioning

– 14 years of full allocation for new plants; replacement plants: 4 years historical emissions of old plant + 10 years full allocation “4 + 14” rule maintained for replacement plants that are currently built and approved

– Standard load factor of 7,500 h/year for lignite-, hard coal- and gas-fired plants

– 12% cap on utilisation of certificates derived from CDM/JI

Federal Environment Ministry announced reduction in cap to 465 mil t p.a. (cf: 71%).

On November, 29, the EU Commission required a further reduction to 453 mil t p.a.(estimated cf: 65-67%). Furthermore, allocation guarantees contained in the NAP I maynot be implemented in NAP II. If new allocation guarantees are implemented in German law the Commission will examine them under EU state aid rules.

German Government disagrees with these decisions but seeks to come to an agreement with the EU.

Emissions Trading

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Update on Emissions Trading: Current status of UK Governmental draft (NAP II)

The UK published a drafted NAP II in March 2006; following public consultation, the Government announced further details of the NAP at the end of June and submitted it to the EU commission on August 21

Key elements:

– Emission cap for CO2 certificates: 237 mil t p.a. from 2008 – 2012 compared with 245 mil t p.a. in phase I

– Auctioning is set at 7% of total allocation, all of which will be taken from the electricity sector

– Allocations to individual sectors will be in line with business as usual except for the electricity sector which will bear the entire shortfall in the total allocation

– 8% cap on utilisation of certificates derived from CDM/JI

– The allocation to the electricity sector, including the new entrant reserve, is 107.7 mil t p.a. compared with 136.9 mil t p.a. in phase I

– Allocation to RWE npower is 12.4 mil t p.a. compared with 15.8 mil t p.a. in phase I

On November, 29, the EU Commission announced that it accepts NAP II nearlyin full. But allocation of > 90% allowances for free may constitute state aid.

Emissions Trading

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3,667

2,257

2,231

6,201

41,819

Reported20052

€ million

ca. € 4.5 – 4.8 bn3,667Capex on fixed assets

ca. +10%2,257Recurrent net income

> +40% 12,231Net income

+5% - 10%5,371Operating result

+5% - 10%39,488External revenue

2006forecast3,4

Pro forma20052, 3

€ million

1 Including book gain of € 0.7 billion for Thames Water2 Exchange rates of (€1 =) USD 1.24; GBP 0.683 Pro forma: Thames Water as discontinued operations4 Based on exchange rates of (€ 1 =) USD 1.25; GBP 0.70

Outlook for 2006Performance

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Outlook for 2006

1,416

437

2,507

2,112

6,201

8,324

Reported20051

€ million

+5% - 10%

2006forecast2,3

7,096EBITDA

5,371Operating result

586Water Division

437RWE npower

2,507RWE Energy

2,112RWE Power (incl. RWE Trading)

Pro forma20051,2

€ million

Operating result

1 Exchange rates of (€1 =) USD 1.24; GBP 0.682 Pro forma: Thames Water discontinued operations3 Based on exchange rates of (€1 =) USD 1.25; GBP 0.704 2006 number American Water only

4

Performance

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