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EON Net Drops as Power Prices Fall, Asset Sales Curb Revenue

EON nuclear power plant
A man jogs past the cooling towers of a nuclear power plant operated by EON SE in Grohnde, Germany. Photographer: Krisztian Bocsi/Bloomberg

EON SE, Germany’s biggest utility by market value, said first-quarter profit fell 13 percent as power prices dropped and asset sales reduced revenue.

Underlying net income, used to calculate the dividend, fell to 1.22 billion euros ($1.68 billion) in the first quarter from 1.41 billion euros a year earlier, the Dusseldorf-based company said today. That was in line with the 1.21 billion euro average of seven analyst estimates compiled by Bloomberg. Sales slid 11 percent to 31.8 billion euros.

“Results of all European utilities were weak due to the mild winter,” Thomas Deser, a fund manager at Union Investment overseeing its stake in EON, said by phone from Frankfurt. “It’s positive that” the Exploration & Production unit “significantly increased earnings before interest and taxes and that EON has sold 60 percent of electricity for 2016 at an average price of 40 euros. That’s a good price.”

German 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. EON, which is expanding abroad as it considers closing plants at home, plans to reduce capital spending and sell assets to cut costs.

EON declined 1.3 percent, the most since May 2, to close at 13.40 euros in Frankfurt. The stock, the biggest decliner in the German benchmark DAX Index today, has fallen 0.1 percent this year.

Profit Outlook

EON reiterated its 2014 outlook of underlying net income of 1.5 billion euros to 1.9 billion euros. Net debt fell 1.4 percent to 31.1 billion euros from a year earlier.

“We’re reducing our debt and costs, without neglecting investments in our future,” Chief Financial Officer Klaus Schaefer said in a statement.

Schaefer didn’t rule out further investments in Brazil, he said today on a call with reporters. EON, the largest shareholder of its Brazilian venture with former billionaire Eike Batista, won’t take a majority stake in Eneva, which had an operating profit in the first quarter, he said.

EON yesterday led a second round of private investments in Eneva.

Smaller competitor RWE AG is scheduled to report its first-quarter results tomorrow after it posted its first annual loss since the Federal Republic of Germany was founded in 1949.

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