Germany's E.ON Paints Gloomy Picture in Latest Forecast

German energy provider E.ON is reviewing its earnings forecasts for 2013 after warning that gas-fired power stations have become “barely profitable” .

E.ON, which released its interim report Tuesday, said the poorer outlook was due to weak economic conditions and a surge in renewable energy. But improvements in other areas saw overall profits more than double in the first nine months of 2012 compared with last year.

However Dusseldorf-based E.ON reported a €179 million ($228m) loss for the third quarter.

Johannes Teyssen, chief executive, said the conglomerate faces "significant challenges” in its generation business. “Dislocations in Europe’s energy markets are intensifying at an unprecedented pace,” Mr Teyssen said in conference-call remarks to journalists. He said that power sales had reduced because of economic slowdowns across Europe, particularly in Italy and Spain. The decline was the greatest in the industry since World War 2.

He noted that E.ON did not disagree with those who said energy’s future lay in renewables. “But the transformation has to be done judiciously and in harmony with efficient, technologically advanced gas-fired power plants and with network expansion,” he said.

E.ON faces "huge challenges," particularly in its electricity generation business, he said, adding that the company is "exploring whether to close some assets." He said one problem is that gas-fired generators "have become barely profitable to operate".

One problem the utility has faced in the past year is the result of the German government’s decision to phase out nuclear power, following the Japanese disaster at Fukushima in April 2011.

E.ON’s share price took a tumble after the announcement, dropping 9.3% in early trading.