EON Shareholders Warn Against ‘Burning’ Money in Turkey, Brazil

EON SE, Germany’s largest utility, defended its expansion into Brazil and Turkey against criticism from shareholders at the annual general meeting today.

We have “the impression EON earns its money in Germany to burn it abroad,” Ingo Speich, a portfolio manager at Union Investment GmbH, a top-10 holder of the shares, said at the meeting in Essen. “Synergies across national or even continental borders are rare in the energy industry.” Other shareholders also pointed to the risks of the expansion.

EON has teamed up “with good, strong partners,” Chief Executive Officer Johannes Teyssen told shareholders. “Brazil and Turkey will be a great pleasure for you.”

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, which is increasingly focusing on expansion abroad, is also studying whether to close unprofitable power plants at home.

EON today confirmed a forecast from January that this year’s adjusted net income, which the company uses to calculate its dividend, will drop to 2.2 billion euros ($2.9 billion) to 2.6 billion euros from 4.2 billion euros a year earlier. Chief Executive Officer Johannes Teyssen said at last year’s AGM that it’s “clear that EON has gotten past the worst and that our room for maneuver increases with each passing day.”

Growing Markets

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 in March.

In a move that signals a shift to faster-growing markets, the utility said in March it plans to increase its stake in Brazil’s MPX Energia SA to 36 percent, paying billionaire Eike Batista as much as 1.56 billion reais ($776 million). EON plans to raise more than 2 billion euros in the next two years selling regional units and a stake in nuclear-fuel processing business Urenco.

RWE AG, Germany’s second-largest utility, said in March 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.

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