EON First-Half Sales Beat Estimates on Power Trading Grow

EON AG (EOAN), Germany’s biggest utility, said first-half sales rose 23 percent from a year earlier as revenue from power and gas trading increased.

Revenue for the first six months of the year was 65.4 billion euros ($80.4 billion), the Dusseldorf-based company said today in a statement, beating the 61.4 billion-euro mean estimate of four analysts surveyed by Bloomberg.

EON’s trading business played a “significant” part in boosting sales, the company said, allowing the utility to maximize the contribution of power stations and reflecting a new gas-hedging strategy.

“Our solid first-half results demonstrate that we’re meeting our existing challenges decisively,” Chief Executive Officer Johannes Teyssen said in the statement. “We successfully renegotiated our gas-procurement contracts, and the transformation of our company through our EON efficiency- enhancement program is moving forward according to plan.”

EON dropped 0.9 percent to close at 17.65 euros in Frankfurt trading.

OAO Gazprom (GAZP), Russia’s gas-export monopoly, agreed to amend long-term supply deals for EON last month after the utility lost hundreds of millions of euros on contracts linked to oil prices. The accord was backdated to the fourth quarter of 2010. The renegotiation of all the company’s oil-indexed gas contracts added 1.2 billion euros to EON’s half-year profit compared with one year earlier, according to the statement.

Atomic Shutdown

“EON is certainly doing better than RWE in the first half because RWE hasn’t already reached a renegotiation of contracts with Gazprom,” Matthias Heck, an analyst with Macquarie Capital Europe Ltd., said today by phone from Frankfurt. The absence of 1.5 billion euros in one-time costs related to Germany’s nuclear phaseout a year earlier also boosted results, he said.

EON has pursued a 15 billion-euro asset-sales program, job cuts and expansion abroad after the Fukushima disaster in Japan prompted Chancellor Angela Merkel to call for the permanent halt of all atomic plants by 2022. The first phase of shutdowns trimmed earnings by 2.5 billion euros in 2011.

As Germany takes reactors off line, it’s pledged to meet power demand with more fossil-fuel-fired plants and alternative energy. EON is raising investments in renewable-power generation and wants to expand in India and Turkey.

The company’s net debt widened by 22 percent to 41.1 billion euros, as of June 30, from a year earlier. That’s higher than expected by Heck, who said more than 5 billion euros of the increase will be offset in the second half.

Grid Sale

A total of 5.5 billion euros from the sale of Open Grid Europe, Germany’s biggest gas distribution system, the deal reached with Gazprom and the reimbursement of withholding tax expected for the second half weren’t included in the first-half total, Marcus Schenck, EON’s chief financial officer, said today on a conference call.

Underlying net income, the profit measure EON uses to calculate its dividend, rose to 3.3 billion euros in the first half from 900 million euros a year earlier, the company said Aug. 7. EON also confirmed its outlook for 2012 profit of 4.1 billion to 4.5 billion euros on the same day.

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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