Earnings Situation
Conversion of Group Reporting Policies to Interna-
tional Financial Reporting Standards ("IFRS")
Through the end of the 2006 financial year, E.ON AG pre-
pared its Consolidated Financial Statements in accordance
with accounting principles generally accepted in the United
States of America ("U.S. GAAP"). Effective January 1, 2007, we
apply International Financial Reporting Standards ("IFRS"),
which are applicable in the European Union and which
deviate substantially from U.S. GAAP in a number of respects.
Detailed explanatory notes on the conversion of Group
Reporting Policies to IFRS and IFRS reconciliations can be
found on pages 203209 of the Condensed Consolidated
Interim Financial Statements and on page 211.
Business Development
Economic development in 2007 had no noteworthy effect on
our business. While energy consumption declined in Germany
and in the sales territory of our U.K. market unit, electricity
and gas consumption increased slightly in Northern Europe
and in Kentucky. On the whole, our business developed well.
We increased adjusted EBIT more than we had anticipated
at year end 2006. Three of our market units--U.K., Nordic, and
U.S. Midwest--operate outside the eurozone. With the excep-
tion of U.S. Midwest, the respective foreign-exchange rates
did not have a significant impact on our earnings situation.
The transactions listed below influenced our business in
2007.
Transactions in 2007
Acquisitions
ENERGI E2 Renovables Ibéricas
On August 13, 2007, E.ON Climate & Renewables GmbH acquired
a 100-percent stake in ENERGI E2 Renovables Ibéricas S.L.U.
("E2-I"), Madrid, Spain. The purchase price totaled roughly
481 million. E2-I and its affiliated companies were fully con-
solidated as of August 31, 2007. Through its affiliated and
associated companies, E2-I primarily operates wind farms in
Spain and Portugal with an installed generating capacity of
about 260 MW. A more extensive development project pipe-
line is in place for the coming years.
OGK-4
On October 12, 2007, E.ON acquired from the Russian govern-
ment holding company RAO UES a majority stake in the
Russian power-plant company OAO OGK-4 ("OGK-4"). After
the acquisition of additional smaller tranches following the
purchase of the majority stake, E.ON holds 72.7 percent of
OGK-4 as of the balance sheet date. The total expense
incurred for this acquisition, which includes a contractually
agreed capital increase of 1.3 billion to finance the invest-
ment program planned for the coming years, was approxi-
mately 4.4 billion. Under Russian capital-markets legisla-
tion, E.ON was required to make a public offer to purchase
the remainder of the shares held by the minority sharehold-
ers of OGK-4, and this offer, at a price of 3.3503 rubles per
share, was made public on November 15, 2007. The accep-
tance period ended on February 4, 2008. E.ON was thus able
to acquire additional shares equivalent to approximately
3.4 percent of OGK-4 and increase its total ownership stake
to 76.1 percent. As was expected, RAO UES did not accept
the offer for its remaining 22.5-percent stake in OGK-4. OGK-4
operates conventional power plants at five locations with
a total installed capacity of 8.6 gigawatts ("GW") and plans
to build additional power plants with a capacity of about
2.4 GW at its existing locations by 2011. The initial recog-
nition of the company in the E.ON Consolidated Financial
Statements took place in the fourth quarter of 2007.
Skarv and Idun
In October 2007, E.ON Ruhrgas acquired a 28-percent stake in
Skarv and Idun, important Norwegian natural gas fields. The
purchase price including incidental acquisition expenses
amounted to 641 million. E.ON's share of the investments
for developing these fields is around $1.4 billion. Skarv and
Idun are both in the northern Norwegian Sea, just below
the Arctic Circle. The reserves acquired by E.ON are roughly
18.4 million standard cubic meters oil equivalent.
Airtricity
On December 18, 2007, E.ON North America Holdings LLC
acquired all the shares of Airtricity Inc., Chicago, Illinois, USA,
for a purchase price of approximately 580 million. Airtricity
operates a number of wind farms in the U.S. states of Texas
and New York with a total installed capacity of around 250 MW.
Full consolidation of the Airtricity companies took place on
December 31, 2007.
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