German E.ON Hit by UK Market

German utility E.ON reported a 12% dip in its pre-tax first-half earnings (Ebit) of about €1.7bn ($1.9bn) August 7. First-half earnings at its networks business were about 3% lower than in the same period last year and its renewables business achieved a slight earnings increase as offshore wind farms in the UK and Germany and an onshore farm in the US came on line.

But in common with other UK utilities such as Centrica, its customer solutions did worse owing to the regulatory price cap. Adjusted Ebit halved, from €470mn to €240mn mostly owing to the price cap, but there were also higher network fees in Germany that cannot yet be passed on to customers. But that is a cashflow problem that will sort itself out later in the year, unlike the UK cap.

E.ON’s first-half sales rose by about 5% year on year to €16.1bn. In line with the Ebit decline, adjusted net income fell by 16%, from €1.1bn to €0.9bn.

Overall, first-half results were in line with the plan, so it continues to expect 2019 adjusted pre-tax earnings (Ebit) to be between €2.9bn and €3.1bn and 2019 adjusted net income to be between €1.4bn and €1.6bn.

E.ON’s economic net debt increased by about €3.6bn to €20.2bn. This was primarily due to the initial application of a new IFRS and a further significant decline in interest rate levels. The latter necessitated another increase in provisions for pensions.

The transaction with RWE is on schedule, with the filing of the planned takeover with the European Commission in January, it said. In late February RWE received approval from Brussels and Bonn for the takeover of E.ON’s and Innogy’s renewables businesses and for the planned acquisition of a stake in E.ON. The preparations for the takeover of innogy are moving forward as planned. E.ON is confident that the transaction can be closed in September of this year, although the EC opened an investigation in March, saying it could damage competition. Its decision is expected September 20, some time after the usual 90-day period.