EON First-Quarter Profit Falls 15% on Lower Power Prices

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EON SE said first-quarter profit dropped 15 percent as lower wholesale power prices hurt earnings at Germany’s largest utility.

Underlying net income fell to 1.01 billion euros ($1.15 billion) from 1.18 billion euros a year earlier, the Dusseldorf-based company said in a statement on Thursday. That matched the average of seven estimates compiled by Bloomberg.

“We already know that 2015 won’t be easy,” Chief Executive Officer Johannes Teyssen said in the statement. EON reiterated its forecast for underlying net income of 1.4 billion euros to 1.8 billion euros this year.

“There is scope for consensus to move from the middle towards the top of the company’s guidance range,” Sanford C. Bernstein & Co. analysts led by Deepa Venkateswaran said Thursday in a note to customers.

Germany’s unprecedented shift to renewable energy has forced EON and its peers to close nuclear reactors and undermined power prices, hurting the profitability of traditional utilities. EON plans to spin off its fossil-fuel plants into a separate company called Uniper, headed by Chief Financial Officer Klaus Schaefer.

‘Difficult Environment’

“We remain skeptical with regard to Uniper,” Ingo Becker, an analyst at Kepler Cheuvreux, said by phone from Frankfurt. “We expect a difficult environment fundamentally and politically.”

EON closed up 2.5 percent, its biggest increase in almost two weeks, at 14.005 euros in Frankfurt, where more than 150 percent of the daily three-month average was traded.

Net income climbed 39 percent to 1.06 billion euros from a year earlier after a lower tax bill, the company said. Sales fell 1.6 percent to 30.6 billion euros.

The average German year-ahead baseload power price, a European benchmark, fell 10 percent to 32.32 euros in the three months through March from a year earlier, according to broker data compiled by Bloomberg.

EON expects the disposal of its 17 percent share in nuclear-fuel maker Urenco Ltd. in 2016 rather than this year, Schaefer told analysts on a call, while he sees “political progress in terms of the right governance for that asset.”

While the CFO said there’s been progress in selling the company’s remaining Italian assets, EON hasn’t decided yet whether to dispose of its exploration and production business in the North Sea.

Uniper may keep the North Sea E&P division, one person with knowledge of the plan said last month. EON is working with Bank of America Corp. on the potential sale of the North Sea assets, which may fetch about $2 billion, people with knowledge of the matter said in March.

Smaller competitor RWE AG is scheduled to report first-quarter results on May 13.

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