E.ON remains on course despite extraordinary business and energy-policy challenges. Its forecast for full-year 2011 is nearly unchanged despite the anticipated negative impact of the economic crisis on its power business and rising margin pressure in its gas business plus the additional negative impact of the shutdown of two of its nuclear power stations in Germany.
E.ON expects its full-year adjusted EBITDA to be between EUR10.7 and EUR11.4 million and its adjusted net income to be between EUR3 and EUR3.7 billion. The roughly EUR500 million adjustment to its original earnings guidance mainly reflects the sale, completed in April, of U.K. power network operator Central Networks and other portfolio measures. E.ON’s current forecast is based on the assumption that its nuclear power stations can return to service after the moratorium. Although the shutdown of Isar 1 and Unterweser nuclear power stations will reduce E.ON’s earnings by around EUR250 million, this will largely be offset by positive effects.
E.ON’s first-quarter sales rose by 8 percent year on year to EUR27.8 billion, whereas adjusted EBITDA, the company’s key earnings metric, fell by 23 percent to around EUR3.5 billion. At EUR1.3 billion, E.ON’s adjusted net income was down by 34 percent.
Losses at the gas midstream business and lower profits at the U.K. retail business, declining power prices and generation margins in Southern Europe, and lower earnings at regional distribution networks in Germany were the main negative factors.
The main positive earnings drivers were significantly higher earnings in gas production, renewables, and Russia along with positive effects from PerformtoWin, E.ON’s efficiency enhancement program.
E.ON’s first-quarter results are the first under its new segmentation which reflects the new organizational setup it announced last fall.
Conventional Generation (nuclear, coal, and gas) increased adjusted EBITDA by 21 percent to EUR1.46 billion. The key drivers were rising transfer prices for deliveries to the Trading unit and higher output in Sweden.
Renewables Generation (hydro, wind, solar, and biomass) grew adjusted EBITDA by 28 percent to EUR396 million on a significant increase in generating capacity, higher transfer prices for hydropower in Germany and Sweden, and higher earnings from green certificates in Italy. E.ON is already a global leader in renewables.
As anticipated, Global Gas’s adjusted EBITDA was sharply lower, falling by EUR810 million to roughly EUR140 million. The main negative factor was margin pressure resulting from the disconnect between long-term, oil-price-indexed procurement prices and declining spot prices. For the year as a whole, Global Gas’s earnings are expected to be down by about EUR0.8 billion. E.ON has successfully renegotiated long-term supply contracts equal to roughly one quarter of its total gas procurement.
Trading’s adjusted EBITDA of -EUR223 million was within the anticipated range. The loss mainly reflects higher transfer prices to the Conventional Generation and Renewables Generation units. A decline in achieved prices on external power sales in the proprietary-trading business was another negative factor.
Adjusted EBITDA of EUR755 million at the Germany regional unit was stable. Lower earnings in the regulated network business were offset by positive developments in the unregulated business.
Adjusted EBITDA of EUR941 million at Other EU Countries (such as the United Kingdom and Hungary) was nearly at the high prior-year level. Narrower margins in the U.K. retail business were offset by higher earnings at distribution networks in Eastern Europe.
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Source: eon, May 11, 2011;