Following solid 2017 results E.ON aims for focused growth during transaction phase of innogy acquisition
- Solid 2017 results create position of strength for planned acquisition of innogy as part of extensive exchange of businesses with RWE
- Adjusted EBIT of €3.1 billion and adjusted net income of €1.4 billion at the upper end of forecast range
- Economic net debt reduced more significantly than expected to €19.2 billion
- 2018 forecast: adjusted EBIT expected to be between €2.8 and €3 billion, adjusted net income between €1.3 and €1.5 billion
- Management to propose dividend of 30 cents per share for 2017 and 43 cents for 2018, an increase of 40 percent for the transaction year
- E.ON’s medium-term growth targets for the transaction phase: adjusted EBIT to increase by an average of 3 to 4 percent annually through 2020,
earnings per share by an average of 5 to 10 percent
E.ON finished the 2017 financial year with very strong results. Adjusted EBIT of €3.1 billion was at the upper end of the forecast range of €2.8 to €3.1 billion. Adjusted net income of €1.4 billion surpassed the prior-year figure by 58 percent and was likewise at the upper end of the forecast range of €1.2 to €1.45 billion. With an economic net debt of just €19.2 billion at year-end 2017 E.ON has already achieved its debt target.
“Our 2017 results demonstrate the success of our strategy so far. We put the burdens of the past behind us faster than originally anticipated, significantly strengthened our balance sheet, and can now enter the transaction with RWE from a position of strength,” E.ON CEO Johannes Teyssen said. E.ON and RWE had previously announced an agreement under which E.ON would acquire RWE’s 76.8-percent stake in innogy as part of an extensive exchange of businesses.
Alongside solid 2017 earnings, debt-reduction measures such as the roughly €3.8 billion in proceeds anticipated in mid-2018 from the agreed-on sale of the Uniper stake to Fortum will give E.ON additional flexibility. E.ON intends to use this flexibility to achieve disciplined, profitable growth during the implementation of the transaction with RWE. Teyssen emphasized that E.ON’s business segments (Energy Networks, Customer Solutions, Renewables) all have growth potential. “The new energy world is green, digital, and distributed. Our customers expect us to provide them with innovative solutions that improve their lives. We intend to meet these expectations. We have a clear customer focus, the right capabilities, and also the financial strength to further enlarge our strong position in the new energy world on our own until the closing of the transaction with RWE,” Teyssen said.
Positive forecast and reliable dividend policy
“The opportunities of the new energy world will benefit not only our customers and employees but also especially our shareholders. We intend to achieve focused and disciplined organic growth,” E.ON CFO Marc Spieker said. Spieker anticipates more good results in 2018. Adjusted EBIT is expected to be between €2.8 and €3 billion, adjusted net income between €1.3 and €1.5 billion. As announced, E.ON intends to propose to the Annual Shareholders Meeting to pay out a fixed dividend of 30 cents per share for the 2017 financial year. Due to the transaction, E.ON strives to pay out a fixed dividend for 2018 as well. At 43 cents per share, it would be 40 percent higher than the previous year’s. “We want to offer our shareholders reliable dividends, including during the implementation of the transaction with RWE,” Spieker emphasized.
Ambitious growth targets in the implementation phase of the transaction
Based on its existing portfolio, which includes the renewables business, E.ON intends to increase adjusted EBIT by 3 to 4 percent annually from 2018 to 2020 and earnings per share by 5 to 10 percent. “We anticipate that the transaction we announced would enable us to surpass these targets”, Spieker said. Compared with the previous medium-term plan for the period 2018 to 2020, E.ON will increase its investments by about 20 percent to a total of roughly €9.5 billion. Just under half will go to the Energy Networks segment, about a quarter each to Customer Solutions and Renewables.
E.ON’s primary focus at Energy Networks in the years ahead will be on upgrades using digital technology that will make its grids smarter and better able to connect power producers and consumers in an increasingly distributed energy world. It also intends to expand its grids in order to better enable them to handle the growing output from renewable and distributed generation resources. This will expand the regulated asset base of the electricity grids by €2 to €3 billion to €21 to €22 billion by 2020.
E.ON wants to make Customer Solutions’ customer-service and –acquisition processes leaner and more digital and bring innovative products to market faster. Efficiency-enhancement programs launched in Germany and the United Kingdom will reduce 2018 earnings by about €100 million but will lay the foundation for profitable growth in the years ahead. E. ON also wants to increase the number of our customers. With a net increase of around 130,000 customers in the fourth quarter of 2017, the company has already achieved a turnaround here.
Between now and 2020, E.ON intends increase the generating capacity of its Renewables segment from 6 to 8 gigawatts, primarily by adding onshore wind farms in the United States and completing Rampion and Arkona offshore wind farms in Europe. E.ON will continue to systematically develop this segment and strengthen its earnings until the planned transfer to RWE.
Generally positive 2017 earnings performance in core businesses
E.ON’s solid 2017 earnings performance resulted primarily from a significant increase (+€270 million) at Energy Networks, which recorded higher earnings in nearly all of its regions, Spieker explained. Positive developments in Germany and Sweden were the main factors. E.ON’s Renewables segment also posted higher earnings (+€24 million), principally because of improved asset availability and higher wind yield. An earnings decline (-€286 million) at Customer Solutions was due mainly to persistently intense competitive and margin pressure as well as non-recurring items in Germany. PreussenElektra’s earnings were lower (-€47 million) primarily because of an extended outage at Brokdorf nuclear power station and lower sales prices.