Berlin - Arabstoday
EON AG, Germany’s largest utility, said 2011 profit slumped 50 percent because of nuclear reactor closures and lower earnings from its power generation and wholesale gas business. Underlying net income dropped to almost 2.5 billion euros ($3.3 billion), beating the 2.33 billion-euro median estimate of 26 analysts surveyed by Bloomberg. The profit measure, which EON uses to calculate its dividend, will be 2.3 billion to 2.7 billion euros in 2012. EON jumped the most since November in Frankfurt trading. Germany’s largest utilities are overhauling operations after the Fukushima disaster in Japan last March drove Chancellor Angela Merkel to order the permanent closing of all nuclear plants by 2022. The shutdown of nuclear stations trimmed earnings by 2.5 billion euros in 2011 and drove EON to announce a 15 billion-euro divestment program, job cuts and plans to expand into new markets including Brazil. The business for conventional power generation “has deteriorated in most European markets,” Chief Executive Officer Johannes Teyssen said in a letter to shareholders today. “The growth opportunities are primarily elsewhere.” Earnings before interest, tax, depreciation and amortization from power generation fell 44 percent in 2011 to 2.1 billion euros, while Ebitda from EON’s midstream natural gas unit dropped 22 percent. The company will pay a dividend of one euro a share, growing to 1.10 euros in 2012 and 2013. ‘Earnings Trough’ “The economic situation is temporarily dampening the demand for power, resulting in markedly narrower margins and lower utilization factors for our conventional power stations,” Teysson said. Last year marked an “earnings trough,” he said. Lower profits from power generation will continue to weigh on earnings through 2012, the company said. EON surged as much as 5 percent, the steepest intraday gain since Nov. 30, and traded at 17.915 euros as of 9:20 a.m. local time. EON is pursuing cost-cutting measures including trimming its workforce by as many as 11,000 people and selling assets. As of the end of March, EON closed deals worth 9.4 billion euros, selling stakes in OAO Gazprom and Italy’s gas distribution network. Further disposal candidates include Germany’s gas transmission network, the EON Energy-from-Waste business and E.ON Westfalen Weser, it said in a presentation. Exceed Target EON’s disposal program may exceed its 15 billion-euro target, according to Citigroup Inc. analysts. “Of more importance to EON’s equity story in our opinion is not so much the disposal program, but the re-investment of the proceeds,” Citigroup’s Sofia Savvantidou and Andrew Simms said in a Feb. 29 note to investors. “Management had guided that up to 50 percent of the disposal money would be used for expansion outside Europe and also into renewables.” Brazil will be the first new region targeted by EON. The company agreed to buy 10 percent of Brazilian billionaire Eike Batista’s MPX Energia SA and set up a power-generation joint venture in January. The two companies plan to jointly generate 20,000 megawatts in Brazil and Chile and will each own 50 percent of the business. Clean Generation EON plans to invest 7 billion euros to expand its clean- energy generation capacity in the next five years as Germany shutters the utility’s nuclear reactors by 2022. EON seeks to build wind farms off the U.K., Scandinavian and German coastlines, including the 1-billion euro Amrumbank West project in the North Sea that Siemens AG, Europe’s largest engineering company, will supply with 80 of its wind turbines. “We intend to commission a new offshore wind farm every 18 months,” Teyssen said. EON at the end of last year owned about 9 gigawatts of renewable generation capacity, about 4.8 gigawatts of which are hydro stations. EON’s renewable energy unit saw EBITDA rise 21 percent to 1.5 billion euros as more wind turbines were installed.