Photographer: Simon Dawson/Bloomberg

EON Sees Profit of Up to 1 Billion Euros After Uniper Split

  • Utility plans to pay dividend of 40%-60% of underlying income
  • EON to list 53% of Uniper after June shareholder meeting

EON SE is targeting underlying net income of as much as 1 billion euros ($1.1 billion) this year after Germany’s biggest utility spins off its Uniper unit to focus on renewables, networks and customer services.

The Essen-based company will be a “strong dividend performer,” and plans to pay shareholders up to 60 percent of net income a year, Chief Executive Officer Johannes Teyssen said on a call with reporters before its capital markets day in London. EON is to list 53 percent of Uniper, pending approval at a shareholder meeting on June 8.

The utility’s decision to separate its fossil-fuel plants and trading into Uniper is one of the most radical responses yet to Germany’s shift toward wind and solar generation, a policy that’s undermining power prices and hurting profitability at traditional utilities. EON’s share price has dropped 37 percent since it announced the spinoff in November 2014 and was the second-worst performer in Germany’s DAX index last year. It’s up about 3 percent this year.

“After the spinoff, our business will depend to a much lesser degree on outside factors that are beyond our control, such as volatile commodity prices,” CEO Teyssen said. EON is active in the “markets of the future. These markets are growing and offer the prospect of stable returns.”

EON expects earnings before interest and tax of 2.7 billion euros to 3.1 billion euros for the new EON, and to be stable for the “next few years,” it said Tuesday in an e-mailed statement.

Unique Performer

Uniper, which stands for unique performance, will focus on conventional and hydropower generation, energy trading and the exploration and production business.

EON is targeting a “solid” investment-grade rating for Uniper, EON Chief Financial Officer Michael Sen said on the call with reporters.

Uniper will take on 4.7 billion euros of net debt, which it plans to reduce by divesting at least 2 billion euros of assets, Christopher Delbrueck, the company’s CFO, said on a separate call with reporters. Uniper’s adjusted Ebitda fell 15 percent to 1.7 billion euros last year from 2014.

“Uniper’s upfront financials look somewhat stronger than we anticipated, allowing it to bear a bit more debt,” Sofia Savvantidou, the head of utilities research at Exane BNP Paribas, said in an e-mailed note. “However, the disposal program has the potential to weaken the story.”

Dividend Plan

Uniper plans a dividend of 200 million euros for 2016, which will thereafter be linked to free cash flow from operations.

EON plans about 10 billion euros of capital expenditure through 2018 and targets starting a new offshore wind park every second year. It’s expecting continuous earnings-per-share growth of 5 percent to 10 percent a year.

The utility is planning a capital structure that will support its current debt rating of BBB+ at Standard & Poor’s and Baa1 at Moody’s Investors Service, the third-lowest investment-grade ranking. EON’s economic net debt will be 21 billion euros after the spinoff.

Underlying net income was previously forecast at 1.5 billion euros to 1.9 billion euros for the whole group this year.

EON rose 2.8 percent to 9.30 euros at 11:41 a.m. in Frankfurt.

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