E.ON Has Proprietary Trading Loss; Boosts Energy Volumes

E.ON Energy Trading SE, a unit of Germany’s biggest utility, posted its first annual loss in proprietary trading last year as the company became more active in the power, natural gas and emissions markets.

The Dusseldorf-based arm of E.ON AG had an adjusted loss before interest and tax of 107 million euros ($149 million) for trading energy commodities for its own account, the company said today in its earnings report for 2010. That compares with a 124 million-euro profit in the previous year. Overall, the unit generated an operating profit of 1.2 billion euros, up from 949 million euros the previous year.

“After two positive years in 2008 and 2009, the challenging environment that affected the energy markets in 2010 also had an impact on last year’s proprietary trading results,” E.ON Energy Trading Chief Executive Officer Tony Cocker said by e-mail today. “We expect this challenging environment will continue in 2011,” he said.

E.ON integrated its regional trading offices in 2008 into a new company led by Cocker. It bought and sold more power, gas and emission allowances last year than in 2009. Electricity trading volume rose 19 percent to 1,472 terawatt-hours, while natural-gas trading gained 34 percent to 2,005 terawatt-hours. Trading in emission allowances climbed 30 percent to 650 million metric tons last year.

The company’s value-at-risk, a gauge of how much it could lose on a given day, was 20 million euros by Dec. 31, up from 11.5 million a year earlier, the earnings report showed.

‘Good Hedging Decisions’

The unit’s overall operating profit was attributable to “good hedging decisions in past years, and as a result our asset optimization performance again strongly contributed to the 2010 results,” Cocker said.

By comparison, profit last year at Electricite de France SA’s London-based unit EDF Trading Ltd. fell 31 percent to 628 million euros before interest, taxes, depreciation and amortization, because of “a sharp deterioration in market conditions since May 2010,” EDF said on Feb. 15.

RWE Supply & Trading GmbH, a unit of Germany’s second biggest utility, said on Feb. 24 it earned a profit from trading energy last year, without providing further details.

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