E.ON Will Give Post-2010 Earnings Outlook at Mid-Year (Update2)
March 10, 2010, 11:57 AM EST(Closes shares in sixth paragraph, adds spending in 10th.)
By Nicholas Comfort
March 10 (Bloomberg) -- E.ON AG, Germany’s largest utility, will give an earnings outlook for 2011 onwards at the middle of this year as economic progress remains “difficult” to gauge.
Chief Executive Officer designate Johannes Teyssen will comment on the “strategic development of the company, including new targets for the years after 2010, in the summer,” CEO Wulf Bernotat said today at a press briefing in Dusseldorf.
European peers RWE AG and GDF Suez SA have lowered earnings targets for the coming years after the recession eroded energy demand, forcing industrial clients to shutter factories. E.ON faces the added challenge of a surge in debt after snapping up power plants and adding clients from Spain to Siberia in 2008. The company is selling assets to reduce borrowings.
“It is difficult to predict the pace of economic recovery, in particular, the market environment of our gas business is adversely affected by overcapacity,” E.ON said today in the company’s 2009 report.
The utility said it expects adjusted earnings before interest and tax to rise by as much as 3 percent in 2010 from 9.65 billion euros ($13.1 billion) last year. A year ago, the company forecast an increase of about 10 percent in adjusted Ebit to 11 billion euros in 2010.
Shares Gain
E.ON rose 1.4 percent to 27.25 euros in Frankfurt trading, the highest closing price since Jan. 22. Today’s gain trims the stock’s decline this year to 6.8 percent, compared with a 3.9 percent drop for the 31-company Dow Jones Stoxx Utilities Index, which includes the Dusseldorf-based energy supplier.
E.ON sold businesses last year that had contributed about 1 billion euros in earnings, Chief Financial Officer Marcus Schenck said at the press conference. That compares with a figure of about 900 million euros published in a company presentation last month.
The utility has raised close to 6 billion euros after selling high-voltage power lines, almost 20 percent of its electricity generation capacity in Germany and a holding company for stakes in local energy providers, the presentation showed.
E.ON is examining the sale of its U.S. utility business, valued at about 4 billion euros by analysts, to reduce debt, a person briefed on the matter said March 2. The person declined to be identified because the plans are private. E.ON spokesman Mirko Kahre declined to comment at the time.
Spending Plan
E.ON is also seeking to lower borrowings by investing less each year in the period through 2012.
The company will spend about 10 billion euros in 2010, 8 billion euros next year and 6 billion euros in 2012, E.ON said today in a Web site presentation. That’s still a continuation of the 2009 to 2011 investment plan, the utility said.
E.ON invested 12 billion euros last year, including 2.8 billion euros in the form of asset swaps, according to the presentation.
Power and natural-gas use in Germany fell about 5 percent in 2009, according to the Berlin-based BDEW utility group. Lower consumption meant European spot prices for gas sank to about half the level set in long-term contracts with E.ON’s suppliers last year, reducing the profitability of its gas unit.
OAO Gazprom, the world’s biggest gas producer, said last month that it agreed to consider the use of spot prices in long- term contracts with European customers to retain market share.
E.ON said in August that Vice Chairman Teyssen will replace Bernotat as CEO from May 1. Bernotat has been at the helm of the utility for seven years.
--Editors: Amanda Jordan, Todd White
To contact the reporter on this story: Nicholas Comfort in Dusseldorf via the Frankfurt newsroom at ncomfort1@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
