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In conversation with the Board of Management

EWE Board of Management The Board of Management of EWE AG: Michael Heidkamp, Chief Sales Officer, Stefan Dohler, Chief Executive Officer, Wolfgang Mücher, Chief Financial Officer, (from left)

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

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

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

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

Are regulations a magic bullet? Stefan Dohler:

For me, the most important thing is that compliance is a cultural aspect. I can have as many rules as I want, yet compliance takes place in the head and heart. The most helpful thing is to use your brain. When following any rules, our employees should ask themselves the following question: What does compliance mean here and now in my everyday work? A culture like this works not by pointing the finger, but by helping out.

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

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

We have to do it well
and we have to be able
to stem it.
Stefan Dohler, Chief Executive Officer
Stefan Dohler, Chief Executive Officer

What is happening with your fossil fuel power plants?

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

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

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

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

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

Will the same be true in the future?

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

We are creating
value in the region.
Michael Heidkamp, Chief Sales Officer
Michael Heidkamp, Chief Sales Officer

How important is regionality in EWE’s business model?

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

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

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

Wolfgang Mücher, Chief Financial Officer
Wolfgang Mücher, Chief Financial Officer

How is your business in Turkey faring?

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

How does the 2018 business year look?

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

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

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

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

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

Thank you for the interview.

The interview was held by the independent editor Wolfgang Witte.