In 2014 E.ON recorded EBITDA of €8.3 billion (prior year: €9.2 billion), underlying net income of €1.6 billion (€2.1 billion), and operating cash flow from continuing operations of €6.3 billion, which was roughly on par with the 2013 figure. All figures are within the anticipated range. The earnings performance reflects the persistently difficult situation on energy markets in Germany and Europe as well as currency-translation effects and portfolio changes. On the cost side, by year-end 2014 the company had already achieved its target for reducing annual controllable costs under its E.ON 2.0 program, which was launched in 2011 and continues to the end of this year. Impairment charges, most of which had already been announced in December, led to a net loss attributable to shareholders of €3.2 billion. The charges were recorded chiefly at E.ON’s generation business in the United Kingdom, Sweden, and Italy. At the Annual Shareholders Meeting on May 7, management will propose a dividend of 50 cents per share, which corresponds to a total dividend payout of about €1 billion and a payout ratio of 60 percent of underlying net income.
Alongside the cost savings delivered by the E.ON 2.0 program, EBITDA benefited from improved earnings at the Generation, Renewables, and Exploration & Production segments. The Renewables segment’s wind and solar business performed particularly well (+20 percent). The first turbines of E.ON’s two new wind farms in the North Sea, Humber Gateway and Amrumbank West, have started to produce electricity. When fully operational, the two farms will have an aggregate capacity of 500 megawatts. The Generation segment benefited primarily from special effect in Germany and Italy. As anticipated, EBITDA was lower at the Germany, Other EU Countries, and Global Commodities segments. In Germany, Hungary, and the Czech Republic the divestments made in 2013 took full effect in the 2014 financial year. Currency-translation effects (primarily in Sweden and Russia) and the new regulation period for the German electricity network business (which began in 2014) also had an adverse impact on earnings.
CFO Klaus Schäfer said: “Considering the continued difficult market environment in many countries, we’re generally satisfied with our 2014 results, particularly since we achieved lasting cost reductions across our business and made a number of successful disposals. Our operating cash flow remained stable at a high level. But it’s also true that extremely low oil prices, adverse changes in currency rates, and a further decline in power prices are having a significant effect on our business. Our forecast for the current year is therefore cautious. In particular, we expect our power and E&P businesses to post earnings declines. We expect E.ON’s 2015 EBITDA to be between €7 and €7.6 billion and underlying net income to be between €1.4 and €1.8 billion. We intend to invest in profitable growth this year as well and also to make selective investments to support our new strategy.”
Strategic renewal will be E.ON’s dominant theme in 2015. Going forward, E.ON will focus entirely on renewables, energy networks, and customer solutions. It intends, in 2016, to combine its other businesses—conventional power generation including hydro and its operations in Russia, global energy trading, and oil and gas production—into a new, independent company with a new name. The new strategic course E.ON set at the end of 2014—“Empowering customers. Shaping markets.”—is the company’s systematic response to the far-reaching changes in the energy landscape.
CEO Johannes Teyssen said: “The new energy world will be driven primarily by customer desires, technical innovation, and digitalization. We see a lot of opportunities here for products and services that we’re developing for and in partnership with our customers. Customers’ growing trust in our company indicates that we’re on the right path. Last year we added 60,000 new customers in Germany alone.” Teyssen emphasized that, alongside the new energy world, the conventional energy world will continue to be indispensable for decades to come. “Large-scale assets for supplying power and gas will continue to be essential in the future if countries intend for their industrial base to remain viable. Starting in 2016, the New Company will play a leading role in ensuring supply security. Under our future setup, the two companies will offer custom-tailored solutions to their respective target groups and will be based on business models that will appeal to different investor interests. 2015 will mark the transition to a new chapter for E.ON. Considering the market and regulatory situation, E.ON’s performance in 2014 was pretty good overall. But we want to achieve more. That’s why we’re taking a proactive approach and laying the groundwork for E.ON to seize the many opportunities of the new energy world and for the New Company to play a key role in the conventional energy world. The preparations are making good progress. We intend to announce initial details about the two companies in the second quarter.”