E.ON SE, Düsseldorf, today presented information about its main 2012 earnings figures and its revised 2013 forecast. CEO Dr. Johannes Teyssen and CFO Dr. Marcus Schenck also explained what consequences the radical changes in Europe’s power generation business will have on E.ON’s strategy. In addition, Teyssen announced that the company would focus its investments even more strictly on its growth businesses: distributed energy, renewables, and markets outside Europe.
On the basis of preliminary, unaudited numbers, E.ON expects its 2012 EBITDA to be €10.8 billion, a 16-percent increase from the prior-year figure of €9.3 billion. In part, the increase reflects non-recurring effects, such as the successful renegotiation of gas procurement contracts with producers and the absence of the adverse impact of Germany’s amended Nuclear Energy Act recorded in 2011. Preliminary earnings are therefore in line with the forecast of €10.4 to €11 billion.
E.ON’s underlying net income is also higher, rising from €2.5 billion in 2011 to an expected level of about €4.3 billion in 2012. This increase is slightly more than with EBITDA mainly because of lower amortization charges and lower interest expenses. This earnings figure is also expected to be in line with E.ON’s 2012 forecast of €4.1 to €4.5 billion.
This yields underlying earnings per share of about €2.2. As planned, E.ON will therefore recommend to its Annual Shareholders Meeting in May that the company pay out a dividend of €1.10 per share.
Owing to the significant deterioration of the business environment of Europe’s energy industry, E.ON announced last November that it was revising its 2013 earnings forecast. E.ON now expects its 2013 EBITDA to be between €9.2 and €9.8 billion. This forecast is already adjusted for the substantial earnings streams that E.ON will lose through its ongoing divestment program. The other main earnings factors will be the midstream gas business’s return to a normal earnings level and the generation business’s reduced profitability.
E.ON expects its 2013 underlying net income to be between €2.2 and €2.6 billion. This is due to the above-mentioned EBITDA factors along with a normalization of the economic interest result and an expected higher tax rate.
As announced in November, going forward E.ON will no longer have an absolute dividend target but instead return to a target payout ratio, which will again be 50 to 60 percent of underlying net income.
E.ON also explained that because of the radical changes in Europe’s energy industry the company will implement its strategy even more swiftly and decisively and adjust parts of it. The unmanaged growth of renewables and the resulting collapse of the EU emissions trading scheme are making in particular gas-fired power plants in Europe—which had already been hit by the recession-driven decline in power demand—largely uneconomic to operate. There must be adequate compensation for maintaining this capacity, which ensures the reliability of the power supply. E.ON will restructure its conventional generation business in ways that will swiftly improve the competitiveness of its generation fleet. Along with further cost reductions and efficiency improvements, E.ON is studying whether to close power plants in Europe.
In addition, E.ON announced that during its transformation phase it will focus its investments, which on balance will decline going forward, even more strictly on its growth businesses. These include, in particular, distributed generation (a business E.ON intends to expand rapidly), renewables, and markets outside Europe, such as Russia and Turkey. Teyssen made clear that he intends to make E.ON’s transformation to be even faster and more decisive and to rapidly increase growth businesses’ share of the company’s earnings.