E.ON Profits Fall, Underlying Earnings Up
German utility E.ON, which runs networks and retails energy across Europe, on August 8 reported a 30% fall in its profits for the first half of the year.
Net profits attributable to shareholders fell to €2.7bn ($3.1bn), from the €3.87bn in 1H2017 which had been boosted by a one-off refund by the government of €2.85bn nuclear fuel tax in June 2017.
But it pointed to adjusted earnings before tax and interest (Ebit), which increased by 10% to €1.9bn, as an indicator of its improved underlying business performance.
E.ON CFO Marc Spieker said: “Our core business — energy networks, customer solutions, and renewables — delivered good results, even though we continue to face fierce competition.” It enjoyed a wider gross margin on its German power and gas sales, but said that its UK retail price increases were more than offset by higher procurement costs, lower power sales, and regulatory effects; the UK introduced a retail price cap in July. E.ON also expects a tariff-driven decline in its Romanian gas network earnings this year - the transition year to the next regulatory period.
Group-wide first half 2018 gas sales were 75.7 terawatt-hours (7bn m3), down 80.3 TWh-gas in 1H2017; that included wholesale gas volumes of 4.8 TWh in 1H2018 and 11.2 TWh in 1H2017.
The company affirmed its full year target of €2.8bn-€3bn for adjusted Ebit, and €1.3bn-€1.5bn for adjusted net income. The latter in 1H2018 was €1.05bn, up 19%.
In March, E.ON agreed a plan with Innogy’s majority owner RWE for Innogy’s takeover and break-up; it was only four months later that embittered Innogy agreed to support the deal – which will see its energy retail and network businesses merged into E.ON – but its gas storage, renewables and Austria assets re-absorbed into RWE. Spieker said August 8: “With Innogy’s active support, we’ll move forward with the integration faster and better. I’m therefore confident that we’ll fully deliver annual synergies of €600mn-€800mn from 2022 onward. Today I reaffirm this target.”
The company also said it closed the sale of its small Swedish gas distribution asset, E.ON Gas Sverige, to European Diversified Infrastructure Fund II on April 25 2018; no price was disclosed.