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EON Profit Declines 64% on Nuclear Exit, Lower Gas Earnings

10 Nov 2011

EON AG, the biggest Germany utility, said nine-month profit slid 64 percent as Europe’s largest power market worked to phase out nuclear energy and earnings on gas wholesaling fell.

Adjusted net income, used by EON to calculate its dividend, fell to 1.6 billion euros ($2.2 billion), the Dusseldorf-based company said today in a statement. The result beat the 1.53 billion-euro average estimate of seven analysts surveyed by Bloomberg. Third-quarter adjusted net income was 652 million euros, based on calculations using Bloomberg data.

“It looks like we’ve hit the bottom in 2011 for the first time in years,” Benita Barretto, an analyst at Berenberg Bank in London, said by phone. “Next year should be adjusted earnings before interest and tax positive year-on-year. We’ll come back to growth, and that will be a relief to the market.”

The disaster at Japan’s Fukushima Dai-Ichi atomic plant this year fueled anti-nuclear sentiment in Germany, spurring the government to plan the closing of all reactors by 2022. Atomic-power use plunged 21 percent after Germany shut eight reactors in March, according to Arbeitsgemeinschaft Energiebilanzen e.V.

Wholesale Earnings

Margin pressure, caused by lower spot prices for natural gas, reduced earnings from EON’s wholesale business for the fuel by 800 million euros in the nine months.

“The economic environment remains difficult in most of the European markets we operate,” Chief Executive Officer Johannes Teyssen said in a statement. Europe’s expansion of its bailout fund for the euro-area “doesn’t mean the danger is past.”

EON fell 1.7 percent, to 16.29 euros a share, at the 5:30 p.m. close of Frankfurt trading. Germany’s benchmark stock index, the DAX, dropped 2.2 percent.

The utility will seek damages in court for losses linked to the nuclear exit, Chief Financial Officer Marcus Schenck said on a conference call today. The legal proceedings will probably be heard in Germany’s highest court, the Bundesverfassungsgericht, he said. Early shut-downs of EON’s reactors and a tax on atomic fuel “reduced earnings by 2.3 billion euros” this year, he said.


Teyssen, who took over as CEO in May 2010, cut borrowings by selling assets including a stake in Stadtwerke Duisburg AG and its U.K. electricity distribution network. The utility outlined a target last November of selling 15 billion euros of assets by the end of 2013. The company today said economic net debt was 34.5 billion euros on Sept. 30. EON has sold more than 9 billion euros of assets in the past year.

Natural gas wholesale earnings fell as a “disconnect between oil and gas prices” was weighing on margins, it said.

EON and German peer RWE AG (RWE), which plans to announce profits tomorrow, have suffered from falling gas prices as they are locked into supply contracts with producers such as Russian gas export monopoly OAO Gazprom who charge higher than spot prices. Negotiations on cutting costs have been “partially successful, but do not yet encompass the entire portfolio,” EON said.

Earnings at the renewable energy business grew 19 percent to about 1.1 billion euros on higher wind-turbine installations.

EON will present plans to streamline management, reorganize domestic operations and fold its gas and trading units into one division to the supervisory board in December, the company said.