Talking Energy 2010 Performance

The challenges facing the energy industry showed no signs of abating in 2010, with the global recession putting our customers and our company under financial pressures, as wholesale prices increased late in the year and especially in 2011.

The issue of affordability of power and gas for our customers will clearly continue to be an issue for the foreseeable future, but, alongside that, we believe strongly that we face equally important issues in terms of reliability of supply for the UK: to keep the lights on and reduce carbon emissions.

And those pressures also saw changes in the generation mix of our generation in the UK, where the CO₂ intensity of our plant went up from 529 tonnes/GWh in 2009 to 557 in 2010. This was largely because of two factors – the coldest winter for years saw coal plant running harder and longer than in 2009, and higher gas prices meant that the coal stations became more economical at a time when both profits and customers' bills were under extreme pressure. Given more normal circumstances in 2011, we would expect our CO₂ intensity to fall, and for us to move towards our group target of reducing our CO₂ intensity by 50% by 2020 (1990 baseline).

During the course of 2010 we did manage to more than double the capacity of our renewable assets in the UK with the commissioning of our Robin Rigg offshore wind farm and our three onshore wind farms at Great Eppleton, Haswell Moor and Butterwick Moor, all in the North East of England.

In 2010, we were shortlisted for the Government’s carbon capture and storage (CCS) competition for our proposed supercritical coal-fired power station at Kingsnorth in Kent. The competition is designed to subsidise the construction of a commercial-sized CCS facility at a UK coal-fired power station. However, when we took the decision to delay the Kingsnorth project because of the effects of the recession on energy prices and demand, we also decided to withdraw our application to the competition on the grounds that we could no longer meet its timescales.

The 2009 Climate Swoop protest at Ratcliffe continued to be controversial when it was revealed that an undercover policeman – Mark Kennedy – was among the protesters arrested at the Iona School in Nottingham. The revelation led to much comment in the national media and, eventually, to the CPS abandoning further prosecutions and to the quashing of those already convicted.

We continue to put customers at the heart of our business and have introduced a number of initiatives aimed directly at helping them, both in terms of providing information and offering them advice on how to reduce their energy consumption.

Talking Energy Live was a series of events to help people talk about the energy issues that matter to them. Launched in spring 2010, the event toured the West Midlands region with an expert energy panel – drawn from a number of organisations - to discuss the energy issues at the heart of communities. Topics discussed included affordability and reliability, lowering use and microgeneration in the home. Following a successful first series, the events went on to tour a number of other cities in the UK, including Manchester, Derby and Sheffield.

But it was clear from the reaction of consumer bodies, the media and from political audiences to price increases by four of the Big Six in 2010 – with only E.ON and EDF holding back price increases for the majority of their customers – that prices continues to be a major issue in the UK. That feeling has continued through 2011, where E.ON’s first price increase for two-and-a-half years (which was announced in January) was greeted with a round of negative media attention.

We also launched our Energy Fit campaign, designed to help customers save more energy at home by offering top tips and advice via a dedicated website (www.eonenergyfit.com). Customers were encouraged to make pledges as to what they would do to both change their energy lifestyles and also the changes they would make to their homes to reduce power and gas usage. More than 100,000 customers have already signed up to the survey and made pledges.

We’ve continued to roll out net promoter scores (NPS) as our key method of getting feedback from customers on how satisfied they are with the service we provide them. To date, we have received more than 200,000 customer feedback comments and we’ve already refined our processes as a result of what they’ve told us. Our NPS at the end 2010 was -17, an improvement on 2009’s -21. Our NPS score, measuring how likely customers are to recommend us, places us in the top two amongst the ‘Big Six’ suppliers. In addition, we have created a 32,000-strong ‘YourSay’ panel (as at 2011) which gives customers the opportunity to share their opinions with E.ON on a range of energy-related topics. Panel members also help shape E.ON’s products and services.

Our focus going forward is simple: we want to provide our customers with cleaner & better energy. That includes progressing ‘big ticket’ items like London Array, which will be the world’s largest offshore wind farm on completion, progressing the work on our nuclear joint venture, Horizon Nuclear Power and finishing our Isle of Grain combined heat and power plant, which will be one of the world’s most efficient power stations.

But it also means helping our customers to take control of the energy they use by encouraging them to insulate their homes, to moderate their usage and to generate their own power. We’ll continue our Energy Fit campaign to enable customers to find ways to manage their energy, either by taking relatively small steps like increasing the amount of insulation they have, or by more significant changes such as fitting solar panels to their roof. We have also provided hundreds of thousands of customers with free energy monitors so they have a real-time view of the energy they use. In addition, we have also started to roll out microgeneration technologies such as ground and air source heat pumps and solar panels which allow customers to generate their own power in their homes.

We remain committed to developing the balanced portfolio of generation options we believe we need to solve the UK’s energy ‘trilemma’ of ensuring that we have reliable, affordable and low carbon supplies of energy going forward. However, the effects of the recession on the UK economy have slowed down the requirement for new generating capacity in the short- to mid-term. We will continue to monitor the ongoing energy requirements in the UK.

However, following the sale of Central Networks in April 2011, a deal which formed part of our Group cleaner & better energy strategy, we will no longer be operating distribution networks in the UK.

This report reflects our approach to how we do business and captures our performance, in relation to our strategy of delivering sustainable solutions to current and future energy challenges. In the past, we’ve called this strategy Changing Energy, but we’ve now broadened this approach in line with our Group strategy, which is to provide our customers with cleaner & better energy. The name may have changed – however the vision remains unchanged: we continue to transform every aspect of energy: how we make it, how it's used, and customer’s experience of it.

Underpinning this are our Corporate Responsibilities which provide the framework and direction for our actions and demonstrate our responsible and sustainable approach to how we do business. By explicitly defining Our Responsibilities, we can focus our efforts so that customers and other stakeholders will know what to expect.

Our CR report is available online, where you can find a comprehensive account of our business performance, with facts and figures, comparisons and case studies.

We’ve also produced a pocket-sized 'CR in brief' leaflet summarising our approach to CR and signposting readers to this web-based report.

The report has been compiled using the G3 guidelines from the Global Reporting Initiative (GRI) . This highlights E.ON's activity across the UK and complements the E.ON Group CR report 2010, available on our Group website, www.eon.com.

The data in this report covers the 1 January to 31 December 2010 reporting period unless stated otherwise, and where indicated has been independently verified by PricewaterhouseCoopers LLP. The Directors are responsible for the content of this report and the preparation of the selected information in accordance with the criteria set out in the Reporting Guidance. E.ON UK management is also responsible for the maintenance and integrity of the Company’s ‘Our responsibilities’ website.

E.ON disposed of its Central Networks business on 1 April 2011. E.ON had full operational controls of the business in 2010 and therefore, Central Networks data have been included - with the exception of GHG emissions arising from distribution losses. In 2010 distribution losses from Central Networks’ electricity distribution system were responsible for most of our scope 2 greenhouse gas emissions but could not be included as part of the assurance process due to limited access to source data at the time of assurance.

We're continually looking for ways to improve our reporting and actively seek feedback from a wide range of stakeholders about what they would like to see in future reports. So, if you have questions or feedback about this report, or the Company's CR activities in general, please contact the Corporate Responsibility team, E.ON UK, Westwood Way, Westwood Business Park, Coventry CV4 8LG cr@eon-uk.com.