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Executives

Dr. Johannes Teyssen – Chairman and Chief Executive Officer

Dr. Marc Spieker – Head of Investor Relations

Dr. Marcus Schenck – Member of the Board of Management

Analysts

Vincent Gilles – Credit Suisse

Patrick Hummel – UBS

Alexander Kenig – Deutsche Bank

Bobby Chada – Morgan Stanley & Co. International Plc

Martin C. Young – Nomura International Plc

Peter Bisztyga – Barclays Capital

Benjamin Leyre – Exane BNP Paribas

John Musk – RBC Capital Markets

Deborah Wilkens – Goldman Sachs

Christopher Copeland – Bank of America Merrill Lynch

Alberto Ponti – Société Générale SA (UK)

James Sparrow – BNP Paribas

Michael Ridley – Mizuho

Eon Ag Ads (OTCQX:EONGY) Q3 2012 Earnings Conference Call November 13, 2012 9:00 AM ET

Operator

Dear ladies and gentlemen, welcome to the conference call of Eon Ag. At our customers’ request, this conference will be recorded. As a reminder all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

May I now hand you over to Dr. Marc Spieker, who will lead you through this conference, please go ahead, sir.

Marc Spieker

Ladies and gentlemen also for my side good afternoon and welcome to our nine months results analyst and investor call. Today I have Johannes Teyssen and Marcus Schenck with me, as usual Johannes will take the first part followed my Marcus, we then available for your questions. Johannes Dr., please go ahead.

Johannes Teyssen

Thank you. Hello, everyone. This obviously definitely not a good day for you on all U.S. our Investors. Before I hand later over to Marcus, who will as usual guide you to our Q3 results, I like to take the opportunity to comment on the key developments in our business. Many of you, obviously all of you certainly have questions about the ad hoc announcement that we sent on yesterday evening, thus I will start with this.

During yesterday afternoon’s management board meeting, we discussed the current status of our mid-term planning for the year 2013 to 2015. This planning process has not been finalized yet. And this is why as of today, we cannot enhance, we will not talk about details. However very clear is that we will not be able to achieve the target setout for 2013 and 2015 and we have therefore decided to put them under review.

For those of you that are keeping a close eye on our company and that we have met on different road shows, the reasons for the shortfall in our earnings on those secret as such, the market environment in our sector is getting increasingly adverse, and it is significantly worse since we set our targets back in 2011.

Let me recap some of the key developments in our markets. First, both power and gas demand is falling in most European countries. In Spain, industrial power demand fell by 7% year-on-year, in September and in Italy overall power demand fell by almost 10% year-on-year. Even in supposedly better off countries such as Germany or Sweden, power demand is contracting, never has such large demand, collapse has occurred in such a short time across Europe and this would be the four out of five years with lower power demand in this continent. And this is mostly the consequent of the euro zone’s sovereign-debt crisis, as one country after the other, puts growth to or into a new recession. In fact the crisis doesn’t show any sign of abating but rather it’s accelerating.

Second point, renewable capacity keeps growing rapidly even though some countries have reduced their support. In Germany, once more six gigabit of solar capacity has been installed in the first nine months only of this year. Despite custom support, subsidies remain generous in many cases because they have not kept up as the rapid fall of the costs of renewable energy. As a result, renewables are increasingly a share of power generation and this as a determent of conventional generation.

The impact on the overall market is becoming increasingly powerful. In Germany, for example, the traditional afternoon peak and power demand has been replaced by an afternoon crunch due to the solar energy production. The market for conventional generation had already become over supplied since the crisis of 2008 and 2009 and with the further contraction of demand and the growth of renewables, it’s not going to get any better.

In fact renewable technologies, we do not have to respond to market incentives or do not suffer on the market developments or severally damaging non-subsidized technologies. Anyway in such oversupplied markets both the margins and the volumes of marginal plants must come under pressure. This is especially rather clean gas plants that are taking the hit for the time being. Spark spread have collapsed from about €10 per megawatt-hour to less than €2 per megawatt-hour here in Germany, load factors are falling heavily, even a highly-efficient CGTs, such as Irsching 5 is now being dispatch probability 6,000 hours per year, last year’s had been 4,000 hours which was relatively normal for such a plant.

Coal prices have come down from around €90 per ton to about €75 per tons. Coal exports from the U.S. are increasing as the shale gas revolution is sidelining local coal demand. In the China, the weaker economy has net and then others to weak power and gas, coal demand. In addition, freight rates remains stuck at depressed levels due to persistent oversupply of shipping capacity. The crisis of 2008 had already let to an oversupply of CO2 allowances.

The continued growth of renewables outside the CGT regimen and the deepening of the euro crisis have further worsened the outlook. CO2 prices have fallen from around €13 per ton to some €8 per ton. The results for the conventional CO2 prices have no reasons to recover. In this aspect, I reach the first decision of ad hoc of yesterday to backlog 900 million tons as a first necessary step but further steps need to follow.

Lower coal prices, lower C2 prices that means lower power prices. Since August 2011, power prices have come down most strongly in the two markets where metals – namely Germany and the Nordic region. German power prices have fallen by about €10 per megawatt hours, Nordic power prices from lower levels by about further €6 megawatt hour. Despite successful forward hedging, this was soon or later negatively impact on earnings of our nuclear and hydro fleets.

Many of these market developments are of its structural character. We have to accept that this might be the new normal. And as if it was not enough already, we continue to see many adverse regulatory and political interventions: tax on coal in the Netherlands, tax on basically all generation technologies in Spain, the increase of hydro tax in Sweden, Robin Hood Tax in Italy and Hungary, but this is getting very long. Meanwhile (inaudible) policy is standing still. The best example is the weathering of the European Emissions Trading Scheme (inaudible) events.

In addition more and more companies are formally taking the energy policies results regards to any kind of European perspectives. It is not strange for example that the support for the solar energy has been caught more strongly in Southern Europe but the solar is most productive, what does it mean for us at E.ON first all this makes clear while we decide the – to put our targets under review.

When we formulated our new strategy two years ago, we did not put – on, we were already convinced the sector environment in Germany and Europe would not improve, while our cleaner and better energy strategy reps indeed on the basic idea that these sectors would go through a major transformation and little or no growth. This is where we decided to carry out a major effort to reduce control of the costs and approved consistency that Marcus will show you in a moment, E.ON 2.0 is progressing faster than initially planned and we’ve delivered its first intangible results already in 2012.

This is also where we decided to refocus our European business portfolio and clean up our balance sheet. We will probably complete our disposal program ahead of schedule and we expect to even over achieve it. We have now already divested $13.2 billion out of our $15 billion target. Two weeks ago, we agree to sell our 50% stake in Horizon Nuclear Power to Hitachi for around €430 million about €100 million more than what we had invested into the project. We have also decided to exit Finland including the Fennovoima project to focus our operations in Nordic region on Sweden and Denmark only. And in Germany, we will focus and concentrate on operations on our four largest regional distributors, discussions with several three other regions distributors are progressing in a constructive spirit.

This is also while we decided to become extremely proven with our capital and to get more value out of less capital. One example is the sale of a 50% stake in three U.S. wind farms to PensionDanmark, soon after commissioning a way to accelerate capital rotation energy of higher returns and this is also while we decide to expand our footprint predominately outside the Europe, the growth perspectives are much stronger than in Europe. Indeed, even though emerging markets are feeling some headwinds from the euro crisis, economic growth is staying at a relatively healthy level.

Through our joint venture with MPX, we have entered the Brazilian market in a format which ticks all the boxes. However fact of the matter is that the transformation of the European landscape is happening as much greatest piece into a much larger extent than it could have been reasonably expected. The conclusion that we draw is that we do not need to change our synergy fundamental, if anything we need to execute our strategy even faster and more resolutely, even if we have already delivered quite a lot over the last two years, even if core beliefs of our strategy remain relative.

We need to ask ourselves a number of questions. First, what can and should we still afford? Second, can we and should we execute all the planned investment proposed by our operations, what can we skip, what must be skipped? Third is our portfolio sufficiently focused yet? Fourth, where should we do less and where should we do more? These are questions that we will and have to answer. We are now focused on reviewing each and every of our businesses. We’ve planned to share the final outcome with you in about two months time.

This concludes my initial remarks. Thank you for your attention. Marcus, over to you.

Marcus Schenck

Thank you, Johannes. Good afternoon ladies and gentlemen, investors and analysts whereas understandably everyone is focused on the outlook. I will first walk you through the Q3 results. Our third quarter 2012 results continue to show a positive developments, compared to the prior year, as the increase is borne by mostly two positives which are both either fully or to a large extents of one-off nature. Keeping this in mind, we have been able to improve EBITDA by 35% to now €8.8 billion.

Underlying net income substantially improved by 155% to €4 billion. In contrast to the first six months results, the positive development in earnings is now also showing through in the operating cash flow. As a consequence, operating cash flow increased by over 170% compared to the half year stage.

Together with this strong cash flow and also supported by disposals, our net debt position improved substantially since the half year stage by over €5 billion to now slightly below €36 billion. In light of these results, we are confirming our full year 2012 outlook for both EBITDA and underlying net income. So far is so good. The program for today does however not stop here. As Johannes has stated, the environments in many of our markets is and remains extremely challenging.

In particular in the European power generation markets, we do not see any sign of improvement at this stage. This is next to interest rate developments or some of the Southern European countries reflected in an impairment charge for €1.2 billion, which we record in our non-operating earnings. I’ll give you some more backgrounds to this later.

My task for today is a mixed one. As usual, I will update you on selected business developments then explain the strong results for the first three quarters 2012. I will then turn to our outlook 2012 and will finally give you some more backgrounds to have you understand especially the impacts of our disposal program on our earnings.

On the business update, let us start with our renewables business. I would like to highlight the successful execution of one key building look of E.ON’s strategy less capital more value. We sold a 50% stake in three wind farms for around US$500 million to PensionDanmark. These three wind farms are Papalote to Creek 1 and 2, as well as Tony Creek and have a total capacity of 433 megawatt. In light of the fact that we also received a cash grant for these wind farms and have some positive cash flows in between. We’ve recycled already approximately 90% of the money invested including interest.

Overall, we expect our renewables business to bring an additional capacity of 630 megawatt into operation during this year. This number does by the way not include London Array, which will bring another 190 megawatt offshore capacity to our portfolio early next year. So you will continue to see us pursue similar year, as with PensionDanmark in order to reapprove value from our attractive pipeline of projects. We do this in partnership with investors that have a long-term financial interest in this asset class.

Let me now turn to the current status of our E&P business. As we reported earlier this year, we faced an unfortunate combination of operational issues in a numbers of our peers. While the overall reserve potential is unchanged, the production schedule will be delayed. On Elgin/Franklin, the field operated by Total, whereof the leakage a total shut down (inaudible) has to be conducted. We expect to restart at the end of Q1 2013, as initially reduced production level however.

The second field I would like to comment on is Rita. Here, we have damaged to a subsea pipeline. The field has not produced at all this year. This also contributes 0.6 million BOE reduction, compared to the first nine months 2011. We’re currently planning a restart of the field in course of the second half of 2013. Regarding (inaudible) doing, we can confirm our communication from the half year reporting. We still expect production start to be in December.

As already explained, this has a certain spillover into 2013 in terms of volumes due to the ramp up phase for such a big fields. Our estimates for this single effects compared to our previous planning is currently around 3 million to 4 million BOE. This is the single biggest volume deviation of our figures. In total, we’re currently expecting volumes to be 7 million to 9 million BOE lower than in the planning underlying our old 2013 EBITDA targets for E&P of €1.7 billion, €2.1 billion.

In our generation business, I would like to draw you attention to two issues. Firstly, we have some news on the Diethelm project. Here we have received commission to continue producing power with our old plants Diethelm 1, 2, 3 until early 2014. This is important for us to fulfill our contractual obligations towards (inaudible) litigation.

Despite this is being a reflection of the generally more positive public and political environment for the plants, our timing for the CoD is delayed. We currently expect receiving all necessary commissions in 2014, while the time for completion depends on the extent of technical modifications. Therefore an exact date for CoD cannot be specified at this moment.

Secondly, we have decided to put on hold our plants regarding the extension of our Waldeck pumped storage plant. This is a clear reflection of the continuous build out of PV in Germany. The number of available high peak hours is reducing with very megawatt of additional PV installed. Next to the fact that the overall German market is still well supplied, we simply lack the confidence that the investment case for peak hydro in Germany is still there. This overall market issue brings me to the last point. We have to take impairments this quarter of around €1.2 billion next.

On the one hand, these impairments are a reflection of the overall difficult market environment, which is let to an increase of capital cost assumptions for several markets and businesses. On the other hand, it is also to some extent results of political intervention. And this is to say one third of the overall amount stands from wipe downs we have to make on our adoption Spanish generation assets. In the Netherlands, we talk about the tax on core generation and in Spain also renewable energy will be subject to higher tax on electricity production.

Then move over to chart four, where we show you the major year-on-year delta effects influence in group EBITDA. There are two very substantial positive factors, which are both either fully or a loss extent one-off nature, both of this are known to you. The first, the nuclear exist effect is the absence of the huge prior year one-off charge. As you will remember, we booked a €1.5 billion one-off in group EBITDA as the Q2 stage in 2011 after German government’s decision to permanently shut down eight German nuclear plants in one go. Due to the fact that this was obviously not repeated this year, we recorded a €1.5 billion positive delta.

The second effect is also to a large extent a one-off. The €0.9 billion improvement in our gas wholesale business mainly results from the settlement with our largest gas supplier, Gazprom. The €1 billion from, the around €1 billion from gas from booked in H1, contained a substantial proportion of compensation for prior year losses and were therefore not be repeated.

The overall gas wholesale effect stood at €1.2 billion at the half year reporting stage. The change to this figure mainly results from the absence when you compare to last year of optimization earnings, which we were able to generate in our gas trading business in the isolated Q3 of 2011. We had highlighted last year that this optimization opportunity that I think the both to remember here are time swaps and optimizing winter summer spreads was pretty unique. We were not able to repeat this in Q3 of 2012.

For the year end, we expect the gas wholesale business to improve year-on-year by similar amount as shown at the half year’s stage around 1.2. Also related to our world’s global gas business reported now in our segment optimization and trading, we record as a one off gain from the revaluation of participations. This was an effect, which we spoke about in Q2 of this year.

The reach in Germany improved substantially compared to the half year results and also compared to prior year level. More than half of the year-on-year improvement is driven by a necessary provision release in the third quarter. However, we’re also seeing sustainable earnings improvement in this segment coming from the regulated activities.

Next to an improved regulatory environment, we’re seeing the first effect from our cost cutting initiative. As we have indicated in our H1 conference call, E.ON 2.0 continues to be rolled out for implementation. I’m pleased to inform you that the changeable progress we reported upon now also starts to show in our accounts, slightly ahead of our initial expectations. Actually, we see E.ON 2.0 contributing already €100 million through the nine months EBITDA. This number should increase to €200 million for the full year. This is a reflection of the speed of which we have been able to implement several of the initiatives. Finally, the Russian business continued its good performance of the prior quarters.

Now to the negative factors, the largest negative impact was in our nuclear/power portfolio. As described in our earlier quarterly reporting, this affects was two main components. One is the loss of volume compared to last year from the shut down of the nuclear plants: Unterweser and Isar 1. The other is related to lower achieved power prices in our outside portfolio mainly in the Central European market area, but also should lower realized spreads from our flexible fleet, a result of lower extrinsic value.

In terms of nuclear tax, we’ve paid 0.3 billion more than in the first nine months of 2011 but the year-on-year difference is not as large as it was at the half year stage. We expect to end the year still 0.2 billion increase of nuclear tax compared to 2011. The inter year change of the delta effect is the result of the timing of the maintenance was during which the fuel rods are exchanged.

The exchange of the rods is the triggering events for the tax payments. Last year’s (inaudible) towards the second half of the year. The tax bill for this year and total €700 million will be representative for future years. Finally, three effects contributed negatively with €0.1 billion each. Firstly on the E&P side, as you know this business is suffering for production issues in several figures as I mentioned before. The year-on-year production volume reductions from megawatts, which is minus 1.3 million BOE and Elgin minus 1.5 billion BOE are the most prominent ones.

I also mentioned Rita, which is not producing at all and contributes a reduction of 0.6 million BOE. Within the segment E&P, this is only partially compensated by better pricing for North Sea volumes and especially better prices for the volumes from our Russian field participation, Yuzhno Russkoye.

Secondly, we’re seeing a downward pressure in gas storage optimization. Similar to the power business where flexibility is not getting much value in the currently well supplied markets and we see a loss in value for our gas sourcing flexibility. This development will build up to €0.2 billion effect for the full year and most likely stay with us for quite sometime. Finally, there is the impact of the Open Grid Europe deconsolidation. As you know, we sold this business in May.

On the slide six and seven, you see the reconciliation from EBITDA to net income. The lower depreciation is the result of basically three different factors, lower volume in E&P, Deconsolidation of Open Grid Europe, as well as the asset impairments from last year.

Our economic net interest expense has improved significantly by €330 million. The main positive factor for this development is a relief of provisions. This effect which is reflected in our current fiscal year 2012 outlook will be only slightly higher in the fourth quarter. It is a one off nature, it is non-cash and at the end of the year the positive impact will however be substantial.

The book gains came down strongly compared to last year. In 2011, this position benefited mainly from the disposal of the remaining Gazprom shares, as well as the disposal of Central Networks in the U.K. Our restructuring costs came down compared to Q3 of 2011. I have already talked about the impairments and hence what is left is our reported tax rate, which increased from very low levels. Remember, last year we were benefiting from a mix of effects, due to the nuclear one-off we lost a considerable portion of taxable income when at the same time, the book gain from the Gazprom disposal was basically tax free. This year on the operational side the weakness of E&P is reducing the tax expense. Adding to this, we have recorded a release of provisions as was communicated with our half year results.

On chart eight, you can see the reconciliation of EBITDA from underlying net income. The strong jump in EBITDA feeds fully through to the underlying net income. The increase of income taxes is smaller than the decrease of the both depreciation and of economic interest expenses.

Chart nine, shows you the reconciliation of the operating cash flow explaining the key effects responsible for the €2.3 billion increase compared to the first nine months, 2011. The first effect obviously is the incremental EBITDA of €2.3 billion compared to last year. This is offsets by two non-cash EBITDA effects. Firstly, the nuclear carve out costs €1.5 billion. And secondly, maybe less prominent, there is a revaluation of infrastructure assets in our Gas business in 2012, also a $200 million non-cash EBITDA effect.

At the half year stage, we still have to show another large negative €1 billion non-cash EBITDA effect related to the settlement with Gazprom. The cash has by now been collected, one important reason for the improvements of the operating cash flow picture.

Now through the positive effects, the most prominent one originates from our Gas storage business where we have a higher net extraction in 2012. In the U.K., effect is known from the half year results. We continued to reduce our coal inventories relative to the 2011 levels. In Russia and Czech Republic, we had negative working capital effects last year caused by regulatory changes, which were not repeated. The U.K. pension funding effect also relates to last year when we had to put additional cash into the fund.

We received back slightly less than half of the fine. We were sentenced to pay as part of the so called (inaudible) case. The lower interest payments relate mostly to the early redemption fees, which we paid for the buyback of E.ON bonds last year. You might also notice that there is another effect that we’re not showing anymore, mainly the €1.6 billion withholding tax payment. As we told you, we had received discuss by now in Q3.

Our net debt situation is described on chart 10. You might remember this chart still from the half year stage. Second, we had highlighted that the show net debt figure was significantly distorted. The Q3 picture confirms our statement from the first half year. We have brought bound net debts by over €5 billion, compared to the figure reported in August to now €35.6 billion. The biggest positive drivers were the operating cash flow and the divestments.

The key facts are as follows. In the course of the third quarter, we invested €1.5 billion bringing the overall figure to €4.2 billion. With this, we’re still some €3 billion shy of the figure planned for the full year 2012. The single biggest share of the total CapEx and also by far the largest contribution to year-on-year CapEx growth continues to be our renewables business. The €1.1 billion invested there account for 26% of group CapEx.

Our overall dividend payments amount to €2.1 billion. Our operating cash contributed a positive €6.8 billion. A very good figure which obviously contains 100% EBITDA relevant one off cash effect from the Gazprom settlements, mainly however compensating past losses. As announced at the half year stage, we booked the cash in from the Open Grid Europe disposal in Q3 bringing the overall proceeds from disposals to now €3.9 billion.

Pension provisions increased by €2.2 billion. Falling benchmark bond yields is net to a further reduction in the discount rates to now three and a quarter for Germany, 50 basis points less than the half year stage and 4% in the UK. In the other position, we see a broad mix of effects all in the minus 200 to minus 300 million euro range, three ones I’d like to mention margining payments in the trading segments, change of the market value of FX derivatives and translation effect on our non-euro denominated bonds.

Let’s now finally look forward at the full year 2012. As I highlighted, we can reiterate our outlook for the 2012 EBITDA and underlying net income for the year 2012, we also confirm our dividend for the year 2012. In light of the very strong Q3 numbers, you might even suspect that we should be able to surpass our earnings target then we reassure you very clearly that we are still rather eying the middle of that EBITDA range.

Johannes has already talked about our mid-term guidance, which we have put under review. With regard to our 2013 guidance, a considerable adjustment will result from a true like-for-like view i.e., taking into account dilution from our disposals. If you remember, the old €11.6 billion to $12.3 billion EBITDA target only included dilution effects up to the achieved disposals as of August 2011. Those were €9 billion of disposals with an EBITDA dilution effect of around $900 million.

As of today, we’re confident to achieve our disposal target during the next few months. In fact, we might even overachieve. To give you a better feeling for the impact of divestments subsequent to August 2011, we have to get a like-for-like view for our 2012 results. This means we have taken our 2012 outlook and removed the contributions from assets that we even have already sold or that still had a contribution in 2012 EBITDA or that we are planning to dispose in the near future.

Most of these disposal candidates will be known to you. There is also a group of other disposals, partially already completed, partially still to happen, which we’ll not detail further at this stage. Taking all disposals into accounts and starting from the mid range point of our current guidance, i.e., 10.7; we arrived at a like-for-like EBITDA for 2012 of €9.6 billion. Our underlying net income, this would translate into an impact of around negative €300 million.

That concludes my remarks and let me now first hand back to Marc.

Marc Spieker

Thanks Marcus. And let me proceed with one final remark. And as Johannes has indicated we plan to inform you about our mid term fund enhance new target set in early 2013. We were satisfying exacted of course and invite you then accordingly. With this I hand over to the operator and ask you to please start the Q&A session.

Question-and-Answer Session

Operator

Thank you. We will now begin our question-and-answer session. (Operator Instructions) The first question comes from Mr. Vincent Gilles by Credit Suisse. Please go ahead.

Vincent Gilles – Credit Suisse

Yes, good afternoon everyone. And I have two questions. The first one is on the impairments. I think, we understand what’s happening in the world of power in Europe, but we’ll be interesting do you have a bit more details on exactly where you’ve been impairing? And then which asset preciously relating to you gave the regions, but maybe a bit more color would be helpful.

The other one is (inaudible) and I’m trying to calculate your chart page 11 each of the initial book season how much that could be (inaudible) but when you’re talking about superior to 15 billion realized in plant reductions. I guess like everyone I’m wondering how between these number could be. And obviously what I’m trying to achieve is the sort of dilution that you’re hinting out. Maybe it would be better, if the numbers came from you and then fantasy works you’ve done in the corner of my desk. So if you could have that would be very good.

Marcus Schenck

Okay. I’m not so sure, I really understand the second question. I believe I mentioned that the overall impact of the dilution of asset sold post August 2011…

Vincent Gilles – Credit Suisse

Sorry…

Marcus Schenck

Yes to be sold is in total €1.1 billion EBITDA which is why when you pro forma our 2012 for that effect and is start from the mid point of our guided range, which has been 10.7, we deduct 1.1, you get to 9.6. I hope that will be enough.

Vincent Gilles – Credit Suisse

Yeah, it’s over €15 billion. I’m just struggling a bit when if you can give us some form of a bit, what the overall number could be?

Marcus Schenck

Okay, overall.

Vincent Gilles – Credit Suisse

Yeah.

Marcus Schenck

Okay, now I get it. You mean whether it’s, 15, 16, 17 or 18?

Vincent Gilles – Credit Suisse

Yeah, put it in simple terms yet.

Marcus Schenck

We expect that we will rather be around $17 billion.

Vincent Gilles – Credit Suisse

Thanks, Marcus

Marcus Schenck

Yeah and if on the impairments, let me give you some more color on that. It is a mix of effects, we have, let me mention sort of the big ones. We have a substantial asset impairments in Holland, which is caused by the introduction of coal tax from next year onwards on our two existing blocks in (inaudible) and we do have also two impairment charges related to total plants power plants in Germany, or projects rather. We have a coal project starting up into which the past five, six years money had been invested. We’ve taken a decision to no longer pursue this project, implying that we have to write off the investments, that has been made there, and there is also a smaller impairment recorded for the government projects.

We do have certain impact from changes to discount rates in particular in some of the Eastern/Southern, Eastern European countries that relates to our assets in Hungary and Slovakia. So there is a material impact there. We do have an impact in Spain, not in our conventional business, but in the – on the wind part sites, I believe, I mentioned that, and those are what I’ve now mentioned explains more than 90% of the text.

Vincent Gilles – Credit Suisse

Okay, thank you very much.

Operator

The next question comes from Patrick Hummel by UBS. Please go ahead.

Patrick Hummel – UBS

Yes, good afternoon. I’m limiting myself to two questions. First one, I am wondering what the deteriorated earnings outlook actually means, in terms of the expectations for gearing and CapEx or growth CapEx in specific because it sounds like the positive effect from the disposals will be offset by the worsening earnings outlook.

So I am wondering how we should think about the growth in areas such as renewables, for example, outside Europe or call it emerging market strategy and the second question very obvious one, but one has to ask it, any thoughts in how we should think about the dividend going forward. I guess (inaudible) is clearly gone but should we just extrapolate the 50% to 60% payout policy for the coming years, whatever the underlying earnings number will be.

Johannes Teyssen

Johannes, take the second one, I think after consultation with our Chairman we have taken all numbers under review and at this point we cannot give any indication to the new decisions we will take there. But the indication I can give you is that we will – when we come back to you we intend to come back with the core numbers of 2012. The final numbers and the expectations for 2013 as early as possible and this will include our policy on the dividend for that year.

Marcus Schenck

Okay on your first question if I get it right, I think your question is, does the increase in disposals, does it give us sort of more leeway to invest into grow for…

Patrick Hummel – UBS

Actually, rather the opposite because I mean the earnings outlook is obviously worse than we all thought that therefore I would assume …

Unidentified Company Representative

The second part of my sentence, it’s rather that we will be using it to work on the leverage. It is more the letter, we still see it’s meaningful to invest into the gradual transformation of our portfolio but clearly everything is under review and that also means that a CapEx in all of our activities is under review more to that we will be communicating then when the plan is ready but in principal, I think the direction is that we would rather look at using the disposal proceeds for the deleveraging.

Patrick Hummel – UBS

Okay. Thanks very much.

Operator

Next question comes from Mr. Alexander Kenig by Deutsche Bank. Please go ahead.

Alexander Kenig – Deutsche Bank

Thanks for taking my question. I had actually two, one is a slight follow up on cash flow and CapEx, could you indicate the flexibility on CapEx for the future years, maybe that’s for the fact (inaudible) you can give us sort of magnitude of delivery that you have there.

The second question would be, when considering the worsened earnings outlook the possible cut in dividend et cetera. Would you be free cash flow, would your free cash flow cover the dividend, is there anything that you could indicate what you would like to see, and my last quarter would be under sales and supply business, I think there has been some a little bit of expectation management towards more of a breakeven results from a previous for the communication, I’d say €200 million to €300 million of EBITDA. Could you give us an idea of what’s on that, is it just a lesser renegotiation success Gazprom or in between the changes and spreads although they have gone quite the opposite so like – quite reconcile that. Thank you very much.

Unidentified Company Representative

I would say, Johannes, I would take the third question to the sales and supply side. I think you rightly interrupted that as being more an issue on the say the market side and the procurement side.

On the procurement, as you always indicated, we have made very significant. And a smaller contracts are still under our renegotiation, but we are very certain and comfortable that we will – stability has to be created on the market side and there is also principal of the contract. And there with the well supplied market, the lower value of taxability as you indicate those two breakeven then the hope for €200 million to €300 million which we still would believe possible and normalized market rather this time, at this point in time with such an amount of oversupply and the demand is fraction of gas to power. This doesn’t possible in the near future.

Johannes Teyssen

And your first two question is flexibility on CapEx, like just a preliminary assessment on this because as you can imagine this is one of the key items that we are working through as part of the ongoing planning process, but I would say for the very early years meaning 2013 and to some extent also 2014, there is probably just some 20%, 30% of flex in that that number increases probably to around 60% when you go further out.

Always bear in mind that in particular our grid, in our grid businesses there is a substantial and regulatory requirements for investments and partially here our investment program is part of say five year plan that have been agreed with a regulators where we then entered into commitments that needs to be honored one of the reasons by the way why we last year sold Central Networks because that was a business which we expected to be cash flow negative until the end of the decade.

So there is going forward at some stage of course flex but we are just not in the business where you can decide we will stop investing and that in many of our businesses means you can do that, but then you lose the concession which is not exactly what makes sense, I believe your second question was when do we think will operating cash flow cover CapEx and dividends if I, the question right.

Look, I prefer to not yet comment on that, this is certainly that is crucial for us in terms of managing that, that metric but before I speculate here this is also something where we need to first explore our plan, and on that basis then we can make statements by when we expect free cash flow to then be positive.

Alexander Kenig – Deutsche Bank

Okay, thank you.

Operator

The next question comes from the Mr. Bobby Chada by Morgan Stanley. Please go ahead.

Bobby Chada – Morgan Stanley & Co. International Plc

Hi, good afternoon. My first question about the hedging you hopefully as usual show your hedge position in the backup slides, effectively fully hedged for ’13 and ’14. Can you give us some idea of what your overall clean dock spread and clean spark spread hedge position looks like even if it’s just in broad terms across your portfolio. And secondly on the E&P outlook for next year, there are lots of moving parts, it’s not clear to me whether that’s actually deteriorated versus the message you gave us in August or whether it’s kind of in line with the same message that you gave in August, perhaps you could give us some feel for production profile for next year?

Unidentified Company Representative

Yeah, let me start with your second question on E&P. I hope this actually not the difference what we said, because I would say this is mainly the numbers are on change there.

As I mentioned before, we do expect for the overall production next year relative to what we had anticipated a year ago. So I think this is one important data point to understand also some of the deviation relative to the guidance we have – we had out so far. We do expect a drop in production between 7 million and 9 million BOE in our non- Yuzhno Russkoye assets and Yuzhno Russkoye this year is at a level of around 38 million BOE and this is a level that also going forward plus or minus one I would say is realistic.

The European portfolio in 2012 for the full year will come outs around 6 plus in terms of production. We expect that to increase to in a rather delayed range here to something like 20 million to 25 million BOE, the biggest single driver here of course is [scurf], which we expect to be in out of 10 next year with only very, very de minimis contribution from a few weeks in December of this year.

So those would be the main metrics that hopefully helped a bit, kink you up and first question, your first question related to the spread hedge ratios. I mean, that’s always a tricky number because in essence the percentage we’re giving is relative to the economic generation and economic generation the 100% depends on where the spreads are, which is why this is a modestly meaningful metric, 2012 fully hedged, 2013 probably north of 60% and 2014, around 40%. As it relates to the spreads, we prefer to not communicate those numbers.

Johannes Teyssen

Let me, Bobby, add two things on this. First of all, the numbers that Marcus mentioned and then referring as he said to a relatively low economic generation, particularly and with regard to the spark spreads. And secondly, they are also considerable differences as you certainly will know by market.

So in Germany the liquidity two, three years out is much higher than the Southern Europe’s. So in Germany and UK, for example, there is more opportunity to hedge all for example the dark spreads more timely than whereas in Southern Europe typically the market does not allow you to hedge much more than one year in advance. So you also need to differentiate them market-by-market.

Bobby Chada – Morgan Stanley & Co. International Plc

Thank you. But the 60, roughly 60 and 40 that you closed for your overall portfolio rather than just your Central European generation portfolio. Is that correct?

Johannes Teyssen

Yeah, excluding Russia.

Bobby Chada – Morgan Stanley & Co. International Plc

Yeah, okay. Perfect. Thank you very much.

Operator

The next question come from Mr. Martin Young by Nomura. Please go ahead?

Martin C. Young – Nomura International Plc

Yeah, good afternoon to everybody. The first question relates to the dividend, just wonder if you could explain your thinking around maintaining the promise on the 2012 dividend yet putting everything in the year to 2013 onwards, it seems to me that given the magnitude of the potential impact on your ‘13 guidance to pay 1.1 in 2013 will take you well above the top end of the 60% range.

And as a consequence, why didn’t you move to cut the 2012 dividend, and then the second question is – it’s hopefully an easy one, and that’s, could you just give some indication of the overall magnitude of the coal tax in the Netherlands that you’ve been relating to? Thank you.

Johannes Teyssen

So for the first question, if you look on our outlook for 2012, so for net income, underlying net income, we see a payout of $1.10 we are fully in the original indicated range of $0.50 to $0.60, and rather to lower end. And there’s no reason whatsoever why we showed them not on our obligations there, and we always had indicated that we saw the – the one we rented was very meaningful for us was the renegotiation of the big contracts to start and Gazprom that forced us to have a very higher payout ratio on ‘11, and there’s no reason after receiving that why we should not share that with our investors and therefore there is no question whatsoever with our Chairman of our Board that he will not honor that for 2013 onwards and the question is since it is a normalized year almost disposals would have been predominantly completed new recessions will happened. We will see the reality of the markets and then we have to readjust all our numbers and decide forward moving the appropriate policies, but the 2012 there is no reason to expect any worries for that and for that number Marcus.

Marcus Schenck

Two more comments on the first core tax around $50 million and then I need to go back to the previous question that Bobby asked just to because I said it is related to our entire European portfolio, the numbers I gave you are related to the UK, Benelux and Germany in total. So it excludes the markets that Marc mentioned such as Italy and Spain with much lower liquidity and just to make sure that that’s not miss…

Martin C. Young – Nomura International Plc

Can I just quickly follow-up on the answer to the first question. Italy and France what are you saying that, but you obviously had a bad news day, yesterday evening, is the day potentially being U.S. and you’re running a risk of another bad news day potentially a few months down the line. And I just wondered why we didn’t move trying to get all that bad news out of the way (inaudible)

Marcus Schenck

Of course we decided that we defeated appropriate that in a year an underlying net income in the range we reported and that doesn’t give any reasons to lower the dividend payment for that year.

Martin C. Young – Nomura International Plc

Okay.

Unidentified Company Representative

Maybe I can add one more thought here. If our previous intention on the €1.10 as I think we’ve always made that clear also driven by the consideration that we thought €1.10 is long-term or is medium-term a number that can also be achieved within our 50% to 60% payout ratio range. We see that at risk and we need to reflect on the overall picture before then putting out something for 2013. So also the years thereafter will have an influence on how we think about it as it was the case last time.

Martin C. Young – Nomura International Plc

Okay, thank you.

Operator

The next question comes from Mr. Peter Bisztyga by Barclays Capital. Please go ahead.

Peter Bisztyga – Barclays Capital

Yeah, good afternoon, two questions from me. Firstly, you have a sense for when you might actually sort of reach the bottom in terms of the profitability of your spread generation business in Europe. I mean is there going to be in 2013? Or will we have to wait until 2015 for that stop deteriorating? So I’m interested in your views there. And then secondly, could you give us some comments from the outlook for gas storage profitability in Germany please?

Johannes Teyssen

The first one is a difficult one because it feels a little bit like we had thought, we had reached bottom in the past and we till haven’t. There was a thought that less PV would be built this year in Germany given that subsidies have been reduced; in fact the opposite seems to be true. So the train doesn’t stop, it even seems to accelerates and that is obviously hitting not only into the spreads but it’s also in particular hitting into the number of hours, the plants are producing, which is I’m a little bit shy to actually come up with a firm you as to when the bottom of the spread generation that has been reached. I think what we observe is that on, as it relates to CCGTs all across Europe, many of them are not producing I would almost dare to say none of them is earning, it’s cost of capital. Can it get worse? I think one let’s learn form the last several years never say that that cannot be the case because that might happen. I mean it’s difficult to see how more negative the green spark spreads can get because I think the markets where we see the highest is only €2, €3 and it’s dropping further whereas I mean at some stage if it’s all zero and there will be no production. So I would say at least 12, 13 we are very close to the bottom, but I would not dare to say more.

On the gas storage, what we mentioned here is that we see this year basically a lower value from the flexibility of these assets, which is maybe to some extent driven by the overall weaker economic activity in Europe but also driven by there are being more flexibility in the overall gas system be that in the long-term contract that various markets participants have be it with the existing, by now existing gas, regas capacity, all of that is providing flexibility to the system and has the flexibly value of storage. We have seen to come down.

The impact, we’re seeing this year as I mentioned for the full year can be sort of around €200 million maybe a little bit less as long as the overall market circumstance stay as they are today and quite frankly we at least don’t think that the European economy next year will grow by 3% to 5%, but rather a much lower number. So we would expect this negative development to also spillover into at least in the near future, meaning the next one or two years. What the work would look like thereafter, I think we’re very much be driven by how the overall economy is going to perform.

Marcus Schenck

May I add for gas-fired power plants that we will take two substantial, two big ones off the market shot in on Germany (inaudible) one of those for examples has produced only on 9 days this year for 87 hours that was it. And before we announced the closure of these plants, we were approached by the TSO supported by the regulator and that they will take these plants in for a limited period. We will still declare them off the market and as they will never return to the market and they will only be left to the TSO for emergency purposes on their costs. That’s in the first step I would say it's roughly a 1,000 megawatt of plants that will leave the market now, but costs will be reimbursed by the regulators and the TSO.

Peter Bisztyga – Barclays Capital

Right, thanks very much.

Operator

The next question comes from Mr. Benjamin Leyre, by Exane BNP Paribas. Please go ahead.

Benjamin Leyre – Exane BNP Paribas

Yes, thank you very much. First question it would be to offside can you perhaps quantify the lucky revision of the nuclear provision at the end of the year with a potentially a lower discount rate given that I assume that you revise that once a year. Second thing do you see through free time debt factor at the right level given your the new assessment of your business risk profile is the fact, is the level to be reach for your debt factor? Thank you.

Marcus Schenck

Okay. On the first question, the nuclear provision was a pension.

Benjamin Leyre – Exane BNP Paribas

For nuclear?

Marcus Schenck

Yes on a nuclear

Benjamin Leyre – Exane BNP Paribas

Yes.

Marcus Schenck

Yeah, the analysis will have to be done whether there we look at long-term an average long-term interest rate, and so the impact of the current environments, I mean, it’s some, but it’s limited. We will have to do the analysis whether that will have an impact or not, also please always be in mind that we have a – also then to look at the cost side of the nuclear provisions.

So it’s too early to say whether that is going to be an impact, what I dare to say is if there is this will not impact our ability to come out in the overall EBITDA guidance. So if there is any concern that you that I think I can take away. As it relates to the debt factor targets, we still believe that long-term three times is the right leverage. We now need to see how quickly we can get to that number. This is also something which will be then driven by the outcome of our planning activities in the coming weeks.

Benjamin Leyre – Exane BNP Paribas

Thank you.

Operator

The next question comes from Mr. John Musk by RBC. Please go ahead.

John Musk – RBC Capital Markets

Yes, good afternoon, everyone. It’s related to the last question in a way, looking at that leverage factor, it would appear that on rough numbers that come 2013 it will be in a similar position to 2012 in sort of high 3s. And do you think that therefore you can get back to three times purely through measures such as CapEx and the additional disposals that you’ve mentioned and can you therefore rule out allow any additional capital measures whether they be hybrids or (inaudible). And then secondly, again related given the capital constrains that you are talking about and wanting to do less capital more value. How do you judge your expansion internationally today versus when you made that decision a year or so ago, so I’m talking here about LATAM, India et cetera.

Marc Spieker

I think for the latter one, I think it’s exactly an example where we are definitely more careful of how much we lend our balance sheet. For example, in the Brazilian exercise a significant part of all investments have been funded by the BNDS so the public bank, and then we share 50%, and 50% of the remaining equity. So the exposure is limited in giving us excess to very significant pipeline and we can almost manage that according to our need. And to such more careful exercise you should expect on any step you would take that we don’t look on outright exposure, but rather would restrict our exposure in an intelligent manner. So we can grow and position, enjoy a pipeline, harvest from the capabilities but not over leverage our balance sheet, and so the other question Marcus?

Marcus Schenck

Yeah, as I said long-term three times is still the number that we think we should be targeting. We fall in to out in the past months that we’ve seen the rating agencies take a harder stance on the sector is such in terms of the business risk profile they attribute to the sector, which is why we also need to think through whether we were always immediately follow of what they’re saying or whether and understand what the impact on our businesses, if we were to do so or whether we were just take some more time to achieve those targets. That is part of the exercise that we are doing right now. Our focus here is as I believe we mentioned before to work on the CapEx side and to make sure that we get through operating cash flow rate, those are the two main leavers next to the completion of the disposal program that we see as our means to take down indebtedness of the company.

Again, when you look at what we’ve done so far on the debt side in just a few years ago and looking at the net financing debt of our company, we have twice the number we have to date. So I think so far we’ve shown that we manage to bring down the debts, I admit at the same time we’ve seen a substantial earnings deterioration given the market circumstances that Johannes spoke about and but over the medium term we are still commit that we will be able to get our metrics into the target zone related to our rating.

Johannes Teyssen

I would almost support likely supported if you look we had €30 billion net financial dept and we’re now first and below €50 million net financial debt. That the pension obligations get we adjusted every quarter with spot index rate that is two and it’s influencing our numbers, but near than the quality of the debt, and 10-year of the debt is different to financial debt therefore we believe we have made significant progress on that, but as Marcus said we will continue to manage that position have productively?

Marcus Schenck

The technical comment on the pensions and you’ve seen that the interest rate has come down very maturely. That I believe is the cause for almost all European companies, but they are don’t necessarily apply that the same logic there.

The standard that we are applying as we are looking at a portfolio of AA raises corporate that basket that portfolio is actually coming down in the sense of number of players within that portfolio quite dramatically and I think there are reasons to argue why the overall rating category needs to be looked at in a different way and there is initiatives driven all across Europe from large corporate that’s the content stand up needs to be revisit us and we need to see whether there is going to be an impact on our provisions going forward.

I actually would expect and I think that would be a more appropriate reflection of the nature of this debt, that there would be some relief in the foreseeable future on that specific component i.e. provisions to come down.

Operator

The next question comes from Ms. Deborah Wilkens by Goldman Sachs. Please go ahead, madam.

Deborah Wilkens – Goldman Sachs

Thank you, I also have two questions. First on disposal the revised target of $17 billion implies $4 billion more of proceeds on an $800 million EBITDA impact would seem a very low sort of multiple for the targeted proceeds less than five times versus your run rate which is around 10 times. Can you help us understand why the targeted proceeds are so low for those remaining assets and then possibly on a post disposal base can you give us a feel for what the maintenance CapEx would be of E.ON?

Unidentified Company Representative

Sorry, can you repeat the last question.

Deborah Wilkens – Goldman Sachs

Sorry, on a post disposal basis what would the maintenance CapEx be so without growth. I’m not asking for the CapEx forecast I’m just asking for what would maintenance CapEx be as a group on a post disposal basis?

Unidentified Company Representative

Okay, I mean first on the overall, on the disposal I think what we said was we were likely be around $17 billion and the overall dilution effect on the EBITDA from that in total will be around $2 billion. I would say this is for first observation this is extremely inline with what we communicated in November of 2010. And I think when that also is in particular reflecting on the pricing environments in the last two years and the current pricing environment this is not such an overall is not such a bad outcome. And when we look at further disposals, please also bear in mind that in particular when you look at the German regional distribution companies there is always a large share of minorities in those and that has an impact on the metrics here, yeah, so we deconsolidate the full EBITDA, but when we partially actually sell 53% in the company, so that is – that has a material impact on the metrics here.

Unidentified Company Representative

Maintenance CapEx going forward post those disposals again we are in the process of kicking every numbers yeah but, it is probably some where around $500 million to $600 million for the group.

Deborah Wilkens – Goldman Sachs

Thank you.

Operator

The next question comes from Mr. (inaudible) JP Morgan. Please go ahead.

Unidentified Analyst

Yeah good afternoon, first question is on the, on the cost cutting you already heard of schedule for 2012, with €200 million I think, you are guiding to zero. Does that mean that the 600 you fit in past 2013 is not conservative, and maybe the 1.5 for 2015 also conservative, I mean could you be launching E.ON 3.0 as a result of what’s happening in the market, that’s first question? And secondly on thermal [trends], can you give us a very rough idea of what the fixed costs could be for those trends which currently out of your money, and which might still remain open in 2013 basically I try to understand what the potential upside could be from (inaudible) thank you.

Unidentified Company Representative

Again already answered the second question that number I don’t have readily available here sorry on E.ON 2.0, I don’t the answer. You want to comment.

Unidentified Company Representative

Well I think with all the bad news I still take the credit we are the most aggressive in the sector to cut costs. And so, a significant amount of people already has left the company by now, much earlier than expected and the progress is a bit of ahead of schedule, but it’s much too premature to believe that the target will be higher than initially seen, the strive for receiving it as early as possible, but we speak to the guidance that we already hand it out. We will challenge that in the course of the process now until we come back to you, but if we can bid a bid, we would always start to bid a bid, but one thing, it’s much premature to speculate on any new program.

Unidentified Analyst

Okay. Thank you.

Operator

The next question, sorry.

Marcus Schenck

I have to make one correction. My answer to the question that [Deborah] asked, was $600 million for maintain CapEx going forward, it didn’t include all our businesses as the number will be higher. It’s more around a $1 billion. Sorry for that.

Operator

The next question comes from Mr. (inaudible) by MindFirst. Please go ahead.

Unidentified Analyst

Yes, good afternoon. Firstly, on the impairments you have carried out and detailed already, does that mean that that is the full process, which you had to do for the new medium-term planning and from that perspective it’s unlikely that anything else is going to come between now and January? And secondly, when you talked about the plant reviews, I think you answered that two gas plants are now leaving the market. I think initially you where targeting three and apart from that you have said earlier this year that you basically constantly have all plants under review, so the overall 1 gigawatts for the moment in the (inaudible) might be just a starting point anything you can comment there. And finally start to come back on that with the maintenance CapEx is that then correct that the €1 billion now compares to what has been in earlier times roughly €2.1 billion?

Johannes Teyssen

Obviously, those megawatts that I talked about is not the full program we are pursuing. We have announced bond closures addition to that in France. We have announced bond closures in the U.K. So, we are challenging further stations in Germany. So this is not the end of any story. These stations that we would have closed now and that we’re booked by the TSO and all cost plus, all risks that are being financed now by the TSO. That is only the specifics of that and actually we were never targeting much more than that to be taken up by the TSO. So that is the number close to the number we expect. There is no other plant that we see at this point that could go under special redeem or other plants we are free to close if you deem into necessary and also see the TSO, doesn’t also see any need for any other plant to stay opened. Anything else is in the few discussion of the management and will be decided whenever we see a loss making situation occurring by the TSO.

Marcus Schenck

On your maintenance CapEx question, I mean the pure maintenance to the best of my knowledge we have never said would be north of €2 billion. It was always around €1.3 billion to €1.5 billion and that is what you need it to compare to what you need to compare to.

Unidentified Analyst

Okay, fine. And just on these impairment potentials?

Unidentified Company Representative

Yeah, I mean impairment this is the analyzes that we now have done, what has not yet happened is what is your outstanding is the goodwill impairment tests which is being conducted in Q4 I don’t have the expectation that that would have an material impact, what can always happen is that when you’re selling assets that’s today may not necessarily always than be in lined with all the value attributed to that asset because there is possibly some old goodwill that has been allocated also to some of our existing assets and that we would and see if and when we announce a transaction and then we’ll expand it.

Unidentified Analyst

Okay, thanks.

Operator

The next question comes from Mr. Christopher Copeland by Bank of America Merrill Lynch. Please go ahead.

Christopher Copeland – Bank of America Merrill Lynch

Yes, thanks good afternoon. Just two questions clarifying Marcus what you answer to Deborah about the slightly misleading EBITDA multiples for the remaining disposals. That looks like your minority interest expense this year is approaching €400 million, can you give us an idea of how much of that refers to the German disclose you are planning to sell. And the second question for Johannes, you said 2013 looks more relaxed like a steady state earnings year with a few pluses and minuses maybe and I wondered whether you still see the need of coming up with a 2015 guidance when you do your medium term planning? Thanks.

Marcus Schenck

I think that is too early to answer, we will look into that if there is a property that it fits to the market 2013 is obviously not burdened anymore by a specific situation like the gas form start on situation. I would not yet call the E&P situation as normal business. The significant delays of production that we see there Marcus I think has made very clear that we’d have no doubt that to guess on oil fields that we won’t have the potential to deliver the number that we originally thought for but not in 2013, so there will be some special burdening of the normal processes in 2013 in the E&P side, but there is no specific hangover situation like what’s say gas renegotiations.Marcus SchenckOkay. Yeah Chris on your first question a around number those regional distribution companies to be sold at the minority line they probably contributes negatively of course of around $100 million.Christopher Copeland – Bank of America Merrill Lynch

Okay, thanks.OperatorThe next question comes from Mr. Alberto Ponti by Société Générale. Please go ahead.Alberto Ponti – Société Générale SA (UK)Yeah, hi, all my question have been answered already. Thank you. OperatorThe next question comes from Mr. Ingo Becker by Kepler Capital Markets. Please go ahead.Ingo Becker – Kepler Capital Markets SA (Germany)Yeah. Thank you. Good afternoon on your top guidance, you’re ahead partly on your (inaudible) program, which implies at least some additional benefits to talk that you didn’t expect earlier of your 35% you had year-over-year, but you still thought you expect tough rather to be in the middle of the range and set off what might implied by strong nine months performance at the upper end. And so because you are expecting a further weakening and the business trends already this year impacting numbers or is it because you are possibly over achieving on this (inaudible) effects into account here already. Our second question would be on your disposal program. Could you maybe elaborate on the general level of interest you have in those assets and maybe differentiate for interest in Germany and abroad?

Unidentified Company Representative

I think the level of interest Marcus is not too bad. There are some assets at some times are almost have a unique buyer. For example our regional distributors we are co-owned with groups of communal, municipal shareholders, those are the initial partners we talk to and we have a process going on with them that appears to be very fair and balanced. You know of the other assets where have shown for example OGE, that is a very, very nice interest and a very constructive, competitive process. So al the assets that we expect in open process, we see significant and sufficient interest and the German regionals I would say are unique and specific, but that doesn’t mean that we sell them below value.

Unidentified Company Representative

In the fourth quarter (inaudible) please bear in mind OGE is no longer contributing, as we have said basically from Q1 onwards. We will see a bit of a weird development in our UK sales business, which had been a spectacular Q4 in last year, it have a spectacular Q1 this year, and we will have an extremely weak Q4 this year and it’s mainly driven by this regulatory obligations to invest into energy efficiency and clean energy. And then also the very poor, well, not show a great result on the E&P sides, it is another sector that is explaining why Q4 we do expect to be fairly weak.

Alberto Ponti – Société Générale SA (UK)

Thank you.

Operator

The next question comes from Mr. James Sparrow by BNP Paribas. Please go ahead.

James Sparrow – BNP Paribas

Yes, hi good afternoon everyone. Just a quick follow-up question in terms of the lead that (inaudible). The question was asked whether you consider hybrid bonds a tool, I think in the past you’ve thought the market wasn’t big enough for them to make a difference, so company will give result to your balance sheet. I’m just wondering if you could give us a follow-up on your view on that particular asset class. Thanks.

Marcus Schenck

Look, this is not the time to speculate about a specific financial instrument. And honestly speaking hybrid is not going to swing the needle for us here. Our focus have to be on those items that have an immediate impact on our debt situation which (inaudible) is CapEx and it’s operating cash flow and those are the two that we are focused on.

James Sparrow – BNP Paribas

Thank you.

Operator

The last question comes from Mr. Michael Ridley by Mizuho. Please go ahead.

Michael Ridley – Mizuho

Yeah, good afternoon. I mean we’ve talked around the subject quite a lot, but I just wanted to check in when you’re undertaking your review that you’re still will be aiming to keep a single A rating and notionally your competitive are now in the highs B for space and you have been pushing down your debt for a number of years. So I’m just wondering whether your property carry on trying to do that or you might move your goal on the credit side. Thank you.

Marcus Schenck

I have no reason to target a lower rating. I mean we target to maintain our rating. There is no change to that. We will stop.

Michael Ridley – Mizuho

Thank you very much.

Operator

This concludes our question-and-answer session. I’ll now hand back to Mr. Spieker.

Marc Spieker

Okay. Thank you very much and thank you very much for everyone to follow our call. As always, the IR team will be available for you after this call to take up any follow-up questions or over in the next days. And with that, I conclude this conference. Thank you very much everybody. Bye-bye.

Johannes Teyssen

Thank you.

Marcus Schenck

Thank you.

Operator

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.

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