Dear Shareholders,
Ladies and Gentlemen,

The MVV Energie Group successfully maintained its course of profitable, sustainable growth in the past 2006/07 financial year in spite of highly unfavourable underlying conditions.

The climate in the energy industry was characterised by increasingly intensive competition in the electricity and gas markets and by the fall in revenues which our companies were obliged to absorb due to the reduction in grid utilisation fees by the regulatory authorities. More than anything, however, the business performance of our group of companies was held back by the extremely mild temperatures throughout the entire 2006/07 heating period. As you will be aware, the sales and earnings performance of our district heating and gas businesses depends to a very great extent on weather conditions.

I am therefore all the more pleased to report that we succeeded in compensating virtually in full for the earnings lost as a result of the unusually mild weather conditions. Not only that, during the 2006/07 financial year we also brought some important strategic and structural measures to a successful conclusion, thus laying key foundations for our stable economic performance in the long term.

This Annual Report documents and provides explanations of developments in key areas in the 2006/07 financial year.

Our strategy is right and our measures are taking effect

Since its IPO, MVV Energie has pursued a strategy of horizontal growth, i.e. of combining municipal companies which have comparable portfolios on the distribution level. During the 2006/07 financial year, we successfully pressed ahead with the processes of networking our partners with each other, learning from each other and exploiting synergy and efficiency potential within the Group.

Expanding our municipal utility network is one of the two pillars of our corporate strategy, which is directed towards achieving profitable growth. The other pillar consists of our high-growth business fields of environmental energy, energy-related services and the sale of electricity on a nationwide basis. In recent years we have made massive investments in our environmental energy and energy-related services businesses, drawing on our experience and expertise to successfully develop these divisions further and increase their value. These investments in our growth are now taking effect. From an earnings perspective, our business portfolio has now proven to be far better balanced and significantly more immune to fluctuations in individual business fields than in earlier years.

We have proven our ability to cope with difficult market and weather conditions as well

All companies with activities in the district heating and natural gas businesses suffered severe downturns in turnover due to the weather factor. The sales of our group of companies nevertheless rose to Euro 2.3 billion, up 4% on the previous year. The unforeseeable negative impact of weather conditions meant that we did not quite reach the sales of Euro 2.5 billion budgeted before the year began. We are nonetheless very satisfied with our performance. This pleasing level of year-on-year sales growth is chiefly the result of notable market successes in the nationwide sale of electricity, in the Czech district heating business and in the field of energy-related services.

We are also very satisfied with our operating earnings

We have reported operating earnings (EBIT) of Euro 215 million in our income statement for the 2006/07 financial year. This level of earnings, which exceeded our expectations, is largely due to an extraordinary item resulting from the accounting treatment of financial instruments in accordance with IAS 39 (2004). More specifically, this relates to the valuation at the reporting date of energy trading transactions requiring physical delivery (commodities futures) which are to be fulfilled by means of supplies in the coming months. Excluding this extraordinary item of Euro 16 million, which is valuation-dependent and of a non-cash nature, we generated EBIT of Euro 199 million before IAS 39 (2004) in the year under report. In the previous year, the equivalent valuation item for IAS 39 was insignificant.

Efficiency enhancements in particular, as well as the positive development of our environmental energy and valueadded services businesses and the nationwide sale of electricity, enabled us to compensate for the loss of earnings of around Euro 33 million in the district heating and natural gas businesses on account of weather conditions. As already predicted upon the publication of our earnings target in February 2007, we therefore virtually matched the very pleasing earnings of Euro 201 million reported in the previous year.

We are proud that our operating earnings of Euro 199 million before IAS 39 in 2006/07 were achieved while largely maintaining tariff prices at unchanged levels for our customers. This proves that our group of companies is well positioned and now also able to cope with very difficult underlying conditions. We are now reaping the fruits of the successful expansion of our high-growth segments and the early introduction of efficiency enhancement measures at our municipal utility network.

Mainly as a result of the 2008 Corporate Taxation Reform, our annual net surplus after minority interests rose from Euro 50 million in the previous year to Euro 109 million in the 2006/07 financial year. This jump in earnings was mainly attributable to deferred tax income of Euro 46 million stated in the 2006/07 consolidated financial statements in connection with the corporate tax reform. Further details about this item can be found in the report on our earnings position.

The positive free cash flow of Euro 119 million (previous year: Euro -52 million) provides a further indication that the earnings power and financial strength of our company are in robust shape.

Sustainably leveraging opportunity

This 2006/07 Annual Report, which we already published on the internet on 28 December 2007, provides you with an explanation of our corporate strategy and the development in earnings and other key figures. However, sustainable healthy company growth does not consist merely of these “hard facts”. Our efforts to adapt the company for the future also have to account for the so-called “soft factors”, such as values, guiding principles and a transformation of the corporate culture.

The years since our IPO in 1999 have witnessed a fundamental change in the tasks facing our company and in its market environment. These dynamic developments not only require structures and management instruments to be adapted - they also necessitate a revision of attitudes and habits. For this reason, during the 2006/07 financial year the Executive Board, management staff and employees of MVV Energie AG developed “move”, an internal company programme intended to shape the corporate culture. Working together, we have compiled some initial proposals aimed at enhancing our corporate culture. The acronym “move” stands for the German words for courage (Mut), openness (Offenheit), change (Veränderung), success (Erfolg). We are convinced that this programme, which will initially focus mainly on internal factors, will in the medium to long term also bear fruit on an external level, thus promoting our competitiveness.

We see climate protection as a growth market for us

Based on an integrated energy and climate programme, the German Federal Government aims to achieve ambitious climate protection targets by 2020, drastically reducing emissions of greenhouse gases harmful to the environment. The European Commission has also called for an increase in the share of renewable energies and improved energy efficiency.

The problem of pollutants is especially severe in cities and conurbations, with their concentration of industry and business, energy generation plants, high population densities and traffic volumes. Accordingly, the greatest opportunities for climate protection are also to be found here. This means that new fields of business are opening up to municipal utility companies in their local markets.

With its environmental energy and energy-related service businesses, the MVV Energie Group has built up a leading position in the German market in recent years. Our non-recyclable waste incineration plants in Mannheim, Offenbach and Leuna and the biomass power plants in Mannheim, Königs Wusterhausen and Flörsheim-Wicker near Wiesbaden mean that our group of companies has an incineration capacity of 1.6 million tonnes per year. In our energy-related services business, we currently operate 24 biomass heating plants and biomass cogeneration plants across the Group. We are building power plants at two locations which will use substitute fuels to supply energy to major industrial sites on a decentralised basis.

Climate protection, energy efficiency and the increased use of regenerative energy also represent special focal points of this 2006/07 Annual Report, most particularly in the chapters Research and Development, Environmental Protection and in the segments Value-Added Services and Environmental Energy. We believe that the municipal utility network of the MVV Energie Group is very well positioned in the growing markets for energy efficiency and renewable energies, particularly in view of the efforts being made by the Federal Government to protect the climate.

The municipal utility market is in transition

The implications of the new phase of regulated competition are far more serious than those of the first phase of liberalisation. We expect many municipal utility companies not to be able to withstand the further increase in regulatory pressure. Following further downturns in earnings, ever more cities and municipalities will be obliged to sell shares in their municipal utility companies or to look for cooperation partners to survive in the market. We will actively exploit the consolidation expected in the municipal utility market. Given our municipal background and our experience and success in further developing our municipal utility shareholdings on a basis of cooperation, we believe that we are well positioned to get to purchase any companies put up for sale. Having said this, we will only invest in shareholdings which meet our requirements and are profitable.

New perspectives and opportunities due to partnership with RheinEnergie AG, Cologne

On 11 October 2007, RheinEnergie AG, Cologne, acquired a 16.1% stake in MVV Energie AG from the 66.2% indirect shareholding previously held by the City of Mannheim. We welcome this strategic partnership with RheinEnergie AG. The future cooperation between the two companies provides MVV Energie with interesting new strategic perspectives and opportunities.

The capital market has honoured our strategic progress

At Euro 29.49, the share price of MVV Energie AG on 30 September 2007 was 27% higher than the closing price for the previous year. Unlike developments in many other cases, the successful capital increase in October 2007 did not have any negative impact on our share price. The share was listed at Euro 31 in mid-November 2007. The vast majority of our shareholders exercised their subscription rights. The rise in our share price, and the resultant increase in the market capitalisation of MVV Energie AG for the first time to more than Euro 2 billion, reflect the great confidence placed in MVV Energie's growth strategy by the capital market, as well as by our shareholders. In order to secure our profitable growth in future as well, we intend to use the proceeds from the capital increase to strengthen our equity basis, to further expand our municipal utility network and to make further targeted investments in our high-growth environmental energy and energy-related services divisions.

We intend to maintain our shareholder-friendly dividend policy

The Executive Board would like to pay the company's shareholders a further attractive dividend for the 2006/07 financial year in spite of the significant one-off burdens as a result of weather conditions. We will once again be proposing a dividend of Euro 0.80 for approval by the Annual General Meeting of MVV Energie AG for the 2006/07 financial year.

The Executive Board of MVV Energie AG would like to thank the managers, employees and employee representatives of all companies within our Group for the work performed during the year under report. Together, their great commitment and willingness to change have contributed to the successful further development of the MVV Energie Group.

We would like to take this opportunity of extending our particular thanks and acknowledgement to the former Chairman of our Supervisory Board and Lord High Mayor of the City of Mannheim, Gerhard Widder. Over the past 24 years in his role as Chairman of the Supervisory Board of MVV Energie AG, he played a key role in the successful development of our group of companies from a local municipal utility company into a nationally and internationally successful energy and service company.

We would also like to thank our shareholders for the trust they placed in us in the 2006/07 financial year. We believe that the MVV Energie Group is optimally prepared for the new phase of regulated competition. We would therefore be very pleased if you would continue to place your trust in us in the current 2007/08 financial year as well.

Yours faithfully,

Dr. Rudolf Schulten
CEO