Report
Expert Corporate Governance Service (ECGS)
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Proxy Report - 09/05/2018

General: In February 2018, E.ON and RWE announced a complex EUR 43bn deal, see section 3.1 for details.


Item 2: Management and Supervisory Board are proposing a dividend of EUR 0.30 per share which corresponds to a payout ratio of 16.30% per share. The dividend is covered by earnings but is not covered by free cash flow. We note that over the past three years, the dividend has not been covered by earnings and moreover has not been covered by free cash flow already in financial year 2016. ECGS believes that dividends should be covered by consolidated earnings and/or free cash flow and supported by a strong balance sheet in terms of solvency and leverage. In line with our guidelines we recommend opposition.

Items 5a, 5b, 5c: PricewaterhouseCoopers, Düsseldorf, is proposed as auditor for the current financial year. Ratio of non-audit/audit fees received by PricewaterhouseCoopers does not raise independence concerns. However, the term of office of the auditor exceeds our maximum acceptable term of office of 10 years in case no audit tender has taken place after the initial engagement period which has not been disclosed by the Company. We consider a longer term of office may impair the auditor's independence. We therefore recommend opposing the re-election of PricewaterhouseCoopers as auditor.

Underlying
E.ON SE

E.ON is an investor-owned energy company. The Generation global unit consists of all Co.'s existing (fossil and nuclear) generation assets in Europe. The Renewables unit is engaged in managing Co.'s carbonsourcing and renewables businesses. The Global Commodities unit buys and sells electricity, natural gas, liquefied natural gas, oil, coal, freight, biomass, and carbon allowances. The Exploration & Production unit is a active in the focus regions of the North Sea (U.K., Norway), Russia and North Africa. The New Build & Technology unit include Co.'s project-management and engineering operations to support the construction of new power plants and the operation of existing plants.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

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As Managing Partner of Expert Corprate Governance Service Ltd (ECGS), Proxinvest has built a large network of corporate governance experts to support clients in corporate governance analysis worldwide. 

Analysts
Expert Corporate Governance Service (ECGS)

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