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E.ON Warns on Profit

E.ON Warns on Profit
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Τετ, 13 Νοεμβρίου 2013 - 18:47
E.ON SE warned Wednesday its full-year profit would be at the low end of the range previously forecast, as Germany's shift to renewable energies continues to take a toll on earnings.
E.ON SE warned Wednesday its full-year profit would be at the low end of the range previously forecast, as Germany 's shift to renewable energies continues to take a toll on earnings.

"These numbers reflect the fact that the ramifications of the transformation of Germany 's energy system, in particular the insufficient market prices for conventional energy, are having a tangible adverse impact on our business," Chief Executive Johannes Teyssen said.

Germany's largest utility by market value now expects to report earnings before interest, taxes, depreciation and amortization of between EUR9.2 billion and EUR9.3 billion ($12.3 billion to $12.4 billion) this year. Underlying profit, an after-tax figure that strips out nonrecurring effects, is forecast between EUR2.2 billion and EUR2.4 billion. E.ON previously forecast ebitda between EUR9.2 billion to EUR9.8 billion, and underlying profit of EUR2.2 billion to EUR2.6 billion.

The more pessimistic outlook came as E.ON reported a wider third-quarter net loss of EUR456 million, compared with a EUR186 million loss in the same period last year. Revenue fell more than 12% to EUR24.69 billion.

While asset disposals and higher costs for carbon dioxide emissions rights contributed to the decline in results, E.ON mainly blamed lower prices for electricity produced at its gas and coal-fired plants.

"Some aspects of our business environment are beyond our ability to influence. In particular our legacy generation business continues to suffer from the upheavals in the power market, which result in part from interventionist government policies," Mr. Teyssen said.

Germany had long planned to exit nuclear energy, but accelerated the process in the wake of the 2011 Fukushima disaster. After that, the country redoubled its push into renewable energy, setting up subsidy programs to support the expansion of wind, solar and other green energy sources.

That resulted in a capacity glut that has slammed power prices and is edging conventional power plants out of the market. In addition, Europe 's sluggish economy has weakened energy demand overall.

As an example of price deterioration, wholesale power prices on the European Energy Exchange now trade below EUR38 per megawatt-hour of electricity, significantly below the level of around EUR54/MWh before the Fukushima accident in March 2011.

E.ON and peers such as RWE AG have responded by cutting costs and jobs, selling assets, reducing investment and shutting down loss-making power plants.

RWE is expected to say it is stepping up its savings and job cuts plans when it reports third-quarter results Thursday.

The problem isn't limited to Germany , however. French utility GDF Suez SA Wednesday announced impairment charges on its fleet of power plants and gas storage facilities that will hit earnings this year, as muted energy demand and low prices have diminished the value of its assets.

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