EON to Raise $2.6 Billion Selling Regional Units, Urenco

EON SE, Germany’s largest utility, plans to raise more than 2 billion euros ($2.6 billion) in the next two years selling regional units and a stake in nuclear-fuel processing business Urenco.

The asset sales will help Chief Executive Officer Johannes Teyssen cut debt and provide capital for expansion in emerging markets including Brazil and Turkey. Economic net debt fell to 35.9 billion euros as of Dec. 31 from 36.4 billion euros a year earlier, according to an earnings statement today. Net income was 2.22 billion euros last year compared with a 2.22 billion-euro net loss a year earlier,

European utilities are contending with weaker demand and a slower economic outlook ahead of Germany’s planned exit from nuclear energy by 2022. EON, which scrapped previous profit forecasts for 2013, plans to reduce capital spending and is selling assets to cut costs. The Dusseldorf-based utility is also studying whether to close unprofitable power plants.

EON may have to shut gas-fired stations in Germany unless policy makers offer support because they’re losing money, in part due to weak demand and high prices for the fuel, Teyssen said.

“The market for most gas-fired power plants is dead,” Ingo Becker, an analyst at Kepler Capital Markets, said by phone from Frankfurt. “They cannot operate profitably anymore. The question is whether Germany can do without gas-fired power plants. If not, there will have to be a political solution to guarantee the security of supply.”

‘Under Pressure’

EON confirmed a forecast, made in January, that this year’s earnings before interest, tax, depreciation and amortization will be about 9.2 billion euros to 9.8 billion euros. That’s a drop from 10.8 billion euros in 2012.

“Our sales volume and earnings remain under pressure, especially in conventional power generation,” Teyssen said.

The shares closed down 0.2 percent to 13.01 euros in Frankfurt trading.

EON and the co-owners of Irsching 5 will decide by the end of March whether to shut the three-year-old gas-fired power plant, Teyssen said. “For us, a temporary shutdown is the only economically viable solution.” He expects “fair compensation” to continue operations.

Reduced Investments

EON will reduce its annual investments from 7 billion euros in 2012 to about 6 billion euros this year and to 4.5 billion euros in 2015, the company said today. It intends to sell its regional Mitte and Westfalen Weser units this year, Chief Financial Officer Marcus Schenck told reporters.

Schenck expects the completion of the Urenco sale next year, or possibly this year. “We are holding talks with interested parties,” he said.

Schenck didn’t rule out increasing EON’s 12 percent stake in MPX Energia SA, whose majority holder is Brazilian billionaire Eike Batista.

RWE AG, Germany’s second-largest utility, said last week it will sell its Dea oil and gas unit to cut capital spending after scrapping a target for asset disposals of 7 billion euros by the end of the year. The Essen-based company reported a 28 percent decline in 2012 net income to 1.31 billion euros.