E.ON’s $10 billion writedown clouds spin-off prospects
ESSEN – E.ON, Germany’s largest utility, posted a record loss for the second year in a row on Wednesday following asset writedowns worth more than half its market value, casting doubt over plans to spin-off its ailing power plants later this year.
E.ON, in the process of spinning off its power generation and energy trading business into a new publicly traded company called Uniper, said its net loss more than doubled to 7 billion euros (5 billion pounds) in 2015, from 3.16 billion euros in 2014.
Analysts had, on average, expected a net loss of 6.48 billion euros.
Germany’s traditional power companies have been hammered by a surge in renewable energy, plunging wholesale electricity prices and the country’s plans to abandon nuclear power.
As a response, E.ON wants to spin off its energy trading and most of its power generation into Uniper, to focus on renewables, networks and services.
“There is the fear that there could be more writedowns. The planned spin-off is subject to a lot of uncertainty,” a Frankfurt-based trader said.
E.ON warned future profits, dividends and cash flows were expected to decline further amid worsening conditions in the power sector.
“Our numbers reflect the far-reaching structural transformation that our industry is experiencing and that continues unabated in the current year,” Chief Executive Johannes Teyssen said in a statement. “The course ahead will be tougher and longer than anticipated,” he added.
E.ON blamed 8.8 billion euros in writedowns on its power plants, most of which have slid into loss as they no longer run the hours necessary to turn a profit, being increasingly replaced by solar and wind power. Shares in E.ON, which have lost more than 40 percent over the past twelve months, opened 1.8 percent higher.
The group said its earnings before interest, tax, depreciation and amortisation (EBITDA) could decline by more than a fifth this year to 6 billion euros to 6.5 billion. This outlook will have to be adjusted following the listing of Uniper, expected for the second half of the year, E.ON said, adding it would be significantly lower as a result. -Reuters