Independent Assurance Statement for E.ON UK
2006 Corporate Social Responsibility Report

The E.ON UK 2006 Corporate Social Responsibility (CSR) Report (the Report), covering January to December 2006, has been prepared by the management of E.ON UK, who are responsible for the selection of content and for the collection and presentation of information. The Reassurance Network was commissioned by E.ON UK to verify the Report in order to assure readers of the accuracy, coverage and balance of content. This includes consideration of the extent to which E.ON UK has responded to its own previous commitments and to the expectations of its key stakeholders.

Any reliance that any third party may place on this Statement is entirely at its own risk.

SCOPE AND LEVEL OF ASSURANCE

The scope of assurance covers the content of the web-based Report and the business activities of E.ON UK that support it. We have assured all sections of the Report, including several developments that post-date the reporting period up to the time of this statement. Our review did not cover information presented elsewhere on the E.ON UK website or E.ON's corporate performance or data.

Our level of investigation has been matched to our view of the potential significance of content to E.ON UK's business objectives, its stakeholders and the Report's wider readership.

Performance data was checked at a top-level only. We did not fully test the accuracy of data capture at the operational level or the robustness of the information management systems that collate it.

We have included a separate Assurance Statement in the printed E.ON UK 2006 Climate Change Review. We have also prepared a summary of performance against E.ON UK's previous commitments, which can be downloaded here in PDF format:

Summary of performance against E.ON UK's previous commitments   (PDF, 176Kb)

APPROACH AND ACTIVITIES

The assurance assignment considered emerging good practice and standards in this area, and has been carried out to the AA1000AS assurance standard which requires us to assess the completeness and materiality of information as well as the overall responsiveness to the issues, concerns and interests of stakeholders. Evidence was supplied and reviewed to verify 164 significant elements of the Report. We also assessed the overall content and tone of the Report against our understanding of material issues and business performance. Where possible, financial and operational content was cross-referenced to the separately audited E.ON Annual Report and the SEC 20-F submission.

The assurance assignment was carried out between January 2007 and April 2007 and consisted of a number of validation and review activities, including:

• Interviews with 50 managers and employees to understand how the activities covered in the Report are managed at both strategic and operational levels, evaluate the quality of data, and to assess the degree of implementation across the company. The interviews included three focus groups with employees at the Bolton and Kingsnorth sites.
• Visits to the coal-fired power station at Kingsnorth and the contact centre at Bolton.
• Review of relationships with stakeholders through interviews with key relationship managers, and attendance at a stakeholder workshop on climate change in London.
• Review of policies, reports, agendas and minutes to supplement management interviews.
• Review of a selection of external sources and competitors' reports.
• Verification of the Report's data, statements and assertions via a review of reasonable evidence to support all elements we viewed as significant.
• Cross reference of data to the Global Reporting Initiative's (GRI's) Sustainability Reporting Guidelines (version 3 - 2006). We did not assess the GRI application level.

We requested a number of changes to the content as part of the assurance process. All significant points raised have been incorporated into the Report to our satisfaction.

CONCLUSIONS

Subject to the limitations listed above, we provide the following conclusions:

• We are satisfied that the scope and content of the Report covers the significant aspects of E.ON UK's business activities and issues which are of likely interest to E.ON UK's main stakeholders or that have received management attention during the reporting period.
• We consider the information to be sufficiently accurate, up-to-date and free from material misstatement or omission for readers to form a balanced opinion of E.ON UK's activities and performance.

OBSERVATIONS AND RECOMMENDATIONS

We have formed the following opinions of E.ON UK's management approach and performance in relation to the issues presented in the Report. These are included to add context for the reader, to give a deeper insight into some of the issues covered and to promote future improvement.

The Report

• We note that E.ON UK has met or is on course to meet 32 of the 38 commitments made in its 2006 CSR Report. We recommend that these commitments are tabulated in future reports for easy reference, with performance against past commitments and targets displayed in similarly structured section.
• In a field that is both broad and complex, we commend E.ON UK for its selection of Report content which displays representative coverage of the business, includes areas that are significant to E.ON UK and its stakeholders, and is also structured to include relevant elements of the GRI guidelines and sector specific supplement.
• The UK Report is in effect a sub-set of the E.ON Group CR Report. We recommend closer links between these two Reports with it being clearer how group targets and priorities are set and how group strategy influences and guides CR in the UK.
• When the sector-specific GRI guidelines (currently in draft form) are published, E.ON UK may consider disclosing performance against these in a specific section of future Reports so that trends can be viewed and comparisons made with other companies.
• Stakeholder engagement is becoming an increasingly valuable management tool for E.ON in terms of helping it to understand impacts, test strategy and to develop sustainable business practices. We would welcome the inclusion of further details of stakeholder mapping and engagement, both at a corporate level e.g. relating to energy strategy, and at a local level e.g. relating to engagement with local communities. Ideally future reports will present some of the most important stakeholder views.
• It is evident from interviews that there is scope for more engagement with employees in CSR. We see employees as a significant audience and this represents an opportunity to involve them more completely in a range of areas covered within the Report.

Management and Operations

We have formed the following opinions of E.ON UK's management approach and performance in relation to the issues presented in the Report:

• Many of E.ON UK's successful CR initiatives appear to be developed locally rather than as part of a company-wide initiative. Some notable examples not covered in the Report include:   consultation with local businesses on the Kingsnorth power station development to prepare them for future involvement in order to foster growth of the local economy; the mobilisation of an array of local landowners around Lockerbie to secure supplies of coppiced wood for the biomass-fired power station; the extensive training of contact centre staff to improve levels of motivation, skills and customer service. This approach is viewed as a strength and appears to be driven by the structured implementation of the E.ON values, including the value "Social Responsibility". We recommend the development of a more formal framework to support local initiatives and ensure that best practices are effectively communicated and replicated.
• E.ON UK has an established risk management system and is evolving this to cover non-financial risks. We recommend that this work is continued so that significant risks relating to non-financial areas (e.g. goodwill, reputation and relationships with stakeholders) are effectively identified, assessed, coordinated and managed as an integral element of governance.
• E.ON UK clearly sees it as important to develop and attract the skills needed to grow the business and to create sustainable technologies for the future. Some interesting and pioneering work is being done to support engineering-related learning within schools and to encourage gifted individuals via apprenticeship schemes. From the diversity figures in Equality and diversity, it is not clear whether E.ON UK is reaching out sufficiently as a potential employer of choice to all ethnic groups and in this context we welcome the work of the recently formed diversity leadership group.
• E.ON UK is driving many Corporate Social Responsibility initiatives and achieving improvements along with business efficiencies and benefits. We note that a proportion of data is only captured once per year for the purpose of reporting. This represents a missed opportunity to incorporate a number of environmental, social and economic performance indicators into management processes where they can be routinely reported, monitored and optimised.

Extract from Assurance Statement in the E.ON UK 2006 Climate Change Review

• It is clear that climate change is one of E.ON UK's top three priorities, along with security of supply and competitive pricing. This commitment is apparent at both individual and organisational levels. The issue is well understood and embedded across key functions. In addition, there is a dedicated expert, reporting to the Chief Executive, to steer the development and oversee the implementation of climate change strategy.
• EON's engagement with key stakeholders is a significant factor in its ability to tackle climate change on a global level.   E.ON UK has recently developed a strategic stakeholder engagement programme which features climate change as a priority. From our attendance at the first such dialogue we believe that a formal engagement programme has the potential to: help E.ON to stay in touch with the society's priorities and expectations in this area; inform future strategy; foster productive working relationships and identify potential partners. The programme is at an early stage and we recommend that it is developed and extended over the coming year.
• Climate change is a core strategic issue for E.ON UK. The complex array of risks and opportunities presented to the company are being analysed at a very detailed level, considering all key technological, economic, environmental and stakeholder aspects. Development of a clear climate change strategy is heavily dependent upon a range of external factors.   There is an urgent need to create increased certainty in a number of these key areas, e.g. incentives for renewable energy and the future global market relating to carbon, in order to make investment in low-carbon technologies commercially attractive. E.ON UK appears to be managing this agenda proactively by steering the debate and raising awareness of what is needed to create a carbon-friendly economic climate.
• There are well-established and effective systems for communicating operational requirements, for governing the control of operations, and for managing and reporting performance. Environmental management systems meet the ISO 14001 standard, and are being expanded. We believe that E.ON UK would benefit from closer reporting of biomass combustion and developing the means to accurately measure the power used by generating sites.
• E.ON UK benefits from being part of a very large international corporation where different regulatory regimes and market requirements drive technological innovation and market responsiveness. This presents the prospect of opportunities to position itself at the forefront of new developments and best management practices relating to climate change. From our limited review to date we have formed the opinion that within E.ON UK there are good communications and appropriate structures for supporting such learning and innovation. Communications and training relating to customer energy saving programmes are particularly effective. We believe that E.ON would benefit from undertaking a regular and detailed benchmark against competitors on key indicators relating to climate change.

Paul Wenman and Malcolm Guy
The Reassurance Network
May   2007