EON Doesn’t See Europe Revival, Awaits Brazil Recovery Plan

EON SE (EOAN) doesn’t expect this year to bring a “significant turnaround” in Europe, while the company is waiting for a recovery plan to be drawn up for its Brazilian investment amid efforts to improve a weak profit outlook.

“We don’t anticipate any significant turnaround in our European markets in 2014,” Chief Executive Officer Johannes Teyssen told shareholders today in Essen, Germany.

Germany’s biggest utility closed down 0.9 percent at 13.785 euros in Frankfurt trading, paring the year’s gain to 2.8 percent. Smaller competitor RWE AG (RWE) gained 0.2 percent to 27.485 euros, in line with the German benchmark DAX Index.

EON, based in Dusseldorf, today reiterated its forecast that underlying net income, the measure used to calculate its dividend, will drop to 1.5 billion euros ($2.1 billion) to 1.9 billion euros this year from 2.24 billion euros in 2013. Chancellor Angela Merkel’s shift toward renewables and away from nuclear has led to a surge in wind and solar generation, cutting power prices already weakened by slow European economic growth.

RWE, which reported its first loss in at least 65 years last year, told shareholders two weeks ago that it expects earnings to “largely stabilize” from 2015.

Union Investment, among the 10 biggest investors in EON, is seeking a “reliable dividend policy” rather than international experiments, Ingo Speich, a fund manager for the financial firm, said at the shareholders’ meeting.

Eneva SA (ENEV3), the Brazil power venture 37.9 percent-held by EON, is developing a recovery plan after project delays forced it to buy from the spot market, widening its losses.

“The last new-build project of Eneva’s first investment phase, a combined-cycle gas turbine in Parnaiba, has experienced delays,” Teyssen said. “The management of Eneva, which is a publicly listed company, is working with its shareholders and banks to put together an enduring recovery plan.”

EON isn’t seeking control of Eneva, he said.

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

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Randall Hackley

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