Eon plans spin-off as it reports record annual loss

Eon, Germany's biggest utility by market capitalisation, posted a record annual loss of €3.2bn on Wednesday as the shift to renewables in Europe's biggest economy continues to squeeze the earnings of conventional power generating businesses.

The net loss in 2014, down from a net income attributable to shareholders of €2bn the year before, is due to "significantly higher" impairment charges. Those came chiefly from Eon's power generation business in the UK, Sweden and Italy, and lower proceeds from disposals, the company said.

Earnings before interest, tax, depreciation and amortisation dropped 9 per cent, from €9.2bn to €8.3bn. Ebitda in Germany dropped 23 per cent to €1.8bn.

"The earnings situation reflects the persistently difficult situation on energy markets in Germany and Europe," Eon said.

Utilities are under pressure in Germany, where the government has set a goal of generating 80 per cent of electricity from clean sources by 2050, up from about a quarter at present. Power generated from clean sources has favourable access to the electricity grid and is subsidised with a levy on customers' bills.

In a shift of strategy, Eon is expected to spin off its fossil fuel and nuclear generation business and focus on renewables. The move, which is expected to take place next year, will create a successor company keeping the Eon brand, which will focus on renewables, electricity distribution networks and services for customers. The spin-off company will combine conventional generation, global energy trading and exploration and production.

In a letter to shareholders, Johannes Teyssen, chief executive, said ebitda and underlying net income of €1.6bn, a measure that excludes non-recurring expenses, were in line with expectations.

Eon's earnings were also affected by the low oil price and the fall in the value of the rouble.

Core earnings from Eon's Russia unit declined 25 per cent, principally due to currency effects and higher fuel costs.

Eon will propose a dividend of €0.50 a share for 2014, down from €0.60 a share in 2013.

RWE, Germany's second biggest utility by market value, predicted a further decline in earnings this year when it published full-year results on Tuesday. It forecast a decline in ebitda from €7.1bn in 2014 to between €6.1bn and €6.4bn.

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

Peter Terium, RWE's chief executive, said that up to 45 per cent of the company's conventional power stations were not making money.

While RWE says it has no plans to split the business, it will also concentrate on renewables and providing energy management technology to customers.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation