Market Environment: Current and Future Challenges
Current market fundamentals and extensive government intervention in the marketplace are creating significant challenges for our business. There's a risk that these challenges could push E.ON off its successful course. During the next three to four years, our earnings will come under considerable pressure from four main factors:
- Lower commodity prices compared with a few years ago
- An altered market environment in our gas business
- A nuclear fuel tax in Germany
- The full auctioning of carbon allowances starting in 2013.
Future developments in energy markets
E.ON will not only need to manage current market challenges but also to adapt successfully to our future market environment. The main trends are:
- Policymakers and the general public support the EU's transition to a greener energy system, creating the need for significant investments and better energy solutions
- Government intervention in energy markets is increasing
- Regional markets continue to converge into a single, integrated EU energy marketplace
- But energy demand is forecast to expand slowly or even stagnate.
- Consistent demand growth, especially in emerging and developing countries
- Increasing need for better energy expertise, in terms of technology and systems
- Growing demand for cleaner technologies.
Debt Factor: Current Challenges
Our significant level of net debt in conjunction with the pressure on our earnings is adversely affecting our debt factor and substantially constraining our financial flexibility. E.ON currently has a broad and diversified portfolio in which the investment and development needs of many of our businesses exceed our financial capabilities.
As a result, there is an obvious need for E.ON to reduce its debt and to develop and deploy the right funding strategy to fit with its strategy to sharpen the focus of its business portfolio.