EON Posts Loss After Writing Off Billions on Plants, Storage

  • Utility is biggest loser on Germany’s Dax Index on Wednesday
  • EON pushes for nuclear deal, saying it has investor support

EON SE posted a first-half loss after taking 3.8 billion euros ($4.2 billion) in charges linked to the listing next month of its Uniper unit. Its shares slumped the most in more than six weeks.

The impairments and contingency losses for its power stations burning fossil-fuel and natural gas storage assets led to a net loss of 3.03 billion euros compared with a 1.15 billion-euro profit a year earlier, the Essen-based company said Wednesday. EON expects an annual net loss for 2016, Chief Executive Officer Johannes Teyssen told reporters on a call, without specifying an amount.

“The writedown most likely won’t be enough,” Guido Hoymann, an analyst at B. Metzler Seel Sohn & Co. KGaA, said by phone from Frankfurt. “We estimate Uniper’s market value at about 3 billion euros. The remaining equity would be very low.”

EON’s decision to separate its Uniper unit and list it on the Frankfurt Stock Exchange is one of the most radical responses yet to Germany’s unprecedented shift toward wind and solar generation, a policy that’s undermining power prices and hurting profitability at traditional utilities. An overhauled version of the company will focus on renewables, networks and retail consumers, while also keeping its German nuclear plants.

The company’s shares fell 7.8 percent, the most since June 24, to close at 8.697 euros in Frankfurt, erasing this year’s gains and making it the biggest loser on the DAX index on Wednesday.

Uniper’s current book value is about 12 billion euros, EON Chief Financial Officer Michael Sen told reporters on a call.

Missing Estimates

Adjusted net income for EON without Uniper in the first half of 2016 fell 28 percent to 604 million euros, with “high” tax payments also contributing, missing the 645 million-euro median estimate of five analysts surveyed by Bloomberg. The company also reiterated that this year’s adjusted net income for the new EON will be between 600 million euros and 1 billion euros.

The writedowns for Germany’s biggest utility come on top of the more than 14 billion euros taken in the past two years, triggered by an energy-price slump.

Benchmark power prices for next year in Germany, Europe’s biggest market, have slumped 25 percent in the past two years, according to broker data compiled by Bloomberg.

The German government delayed a nuclear decommissioning deal with the nation’s reactor operators to September, Sen told reporters on the call. EON said it has the support of its investors to strike a deal pushed by Teyssen.

The “expensive solution” that may exceed the company’s provisions by as much as 2 billion euros would force EON to delay investments, cut costs and “if necessary take measures to strengthen our balance sheet,” including capital measures, to fund the risk premium, Teyssen said.

Competitor RWE AG is scheduled to report first-half earnings on Thursday.

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