SHARE
COPY LINK

EARNINGS

Energy giant EON to divest away from Europe

Germany's EON, the world's biggest private utilities group, unveiled a major strategic shift on Wednesday, turning its focus away from Europe and toward emerging markets to restore flagging profits.

Energy giant EON to divest away from Europe
Photo: DPA

The company, with annual sales of €80 billion ($110 billion), warned profits would fall in coming years and announced plans to offload €15 billion worth of assets by 2013.

“Europe’s main priority is to make its energy supply more efficient and climate friendlier. But other parts of the world still have a lot of catching up to do in terms of expanding their generation capacity,” it said.

“EON is a leading expert in building conventional and renewable generating facilities. Going forward, we intend to leverage our experience and expertise not only in Russia and North America but also in two other regions.”

According to press reports, these regions are Asia and South America. EON did not say which assets were on the block but press reports have identified its power grid in Britain, thought to be worth about €4 billion, and its 3.5-percent stake in Russian gas giant Gazprom.

Finance director Marcus Schenck gave little away at a news conference on Wednesday, saying only that the company was “studying all the options” with regard to its British grid.

The new strategy is motivated by the need to restore profitability, with the company indicating that operating profit would fall in 2011 and 2012 before returning to the level of 2010 in 2013.

It warned of “considerable business challenges” in the years ahead such as German plans for a tax on nuclear fuel, the auctioning of EU carbon allowances and tougher conditions in the gas market.

The company said in October that it was being forced to write down the value of assets Italy, Spain, and France on its accounts by €2.6 billion and on Thursday EON said its third-quarter loss was €389 million.

It said its dividend payout would fall from €1.50 per share this year to €1.30 per share for 2011 and 2012. The proportion of its profits that it pays out to shareholders would remain at 50 to 60 percent, it said, indicating that it expects earnings to be lower in 2011 and 2012.

The asset sales are also aimed at reducing its debt pile, estimated at €45 billion ($62 billion), built up in recent years with acquisitions across Europe.

EON also aims to improve profits through a simplified organisational setup and renewed efforts to enhance efficiency. This will deliver €600 million in annual earnings improvements by 2013, it said.

“EON will become more focused and at the same time more international. In Europe, we’re going to concentrate on what we can do best and on areas where we see the biggest opportunities for profitable growth,” the firm said.

“Outside Europe, we’re going to achieve additional business growth by deploying our expertise in areas where we’re a true outperformer,” chief executive Johannes Teyssen said.

The news caused EON’s share to rise over 4 percent.

AFP/rm

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

BUSINESS

France’s EDF hails €10billion profit, despite huge UK nuclear charge

French energy giant EDF has unveiled net profit of €10billion and cut its massive debt by increasing nuclear production after problems forced some plants offline.

France's EDF hails €10billion profit, despite huge UK nuclear charge

EDF hailed an “exceptional” year after its loss of €17.9billion in 2022.

Sales slipped 2.6 percent to €139.7billion , but the group managed to slice debt by €10billion euros to €54.4billion.

EDF said however that it had booked a €12.9 billion depreciation linked to difficulties at its Hinkley Point nuclear plant in Britain.

The charge includes €11.2 billion for Hinkley Point assets and €1.7billion at its British subsidiary, EDF Energy, the group explained.

EDF announced last month a fresh delay and additional costs for the giant project hit by repeated cost overruns.

“The year was marked by many events, in particular by the recovery of production and the company’s mobilisation around production recovery,” CEO Luc Remont told reporters.

EDF put its strong showing down to a strong operational performance, notably a significant increase in nuclear generation in France at a time of historically high prices.

That followed a drop in nuclear output in France in 2022. The group had to deal with stress corrosion problems at some reactors while also facing government orders to limit price rises.

The French reactors last year produced around 320.4 TWh, in the upper range of expectations.

Nuclear production had slid back in 2022 to 279 TWh, its lowest level in three decades, because of the corrosion problems and maintenance changes after
the Covid-19 pandemic.

Hinkley Point C is one of a small number of European Pressurised Reactors (EPRs) worldwide, an EDF-led design that has been plagued by cost overruns
running into billions of euros and years of construction delays.

SHOW COMMENTS