The World's #1 Renewable Energy Network for News, Information, and Companies.

German Utility EON Plunges: Shift to Renewable Energy Presents 'Huge Challenges'

German Utility EON Plunges: Shift to Renewable Energy Presents 'Huge Challenges'

EON AG plunged the most in a year after Germany's largest utility scrapped profit forecasts and said the shift to renewable energy presents "huge challenges."

The Dusseldorf-based company said today it may have to cut dividends and close power stations because lower electricity prices in Germany are making it difficult for gas-fired plants to make money. EON is reviewing forecasts for the next three years because existing targets are no longer achievable.

“We face huge challenges, particularly in our generation business,” Chief Executive Officer Johannes Teyssen said today in an earnings statement. “We’re further optimizing our conventional generation portfolio and also exploring whether to close some assets.”

Germany’s shift to renewables has helped cut wholesale power prices 15 percent this year as wind turbines contribute more electricity to the grid. EON has already seen earnings trimmed by Chancellor Angela Merkel’s decision to close all nuclear power plants after lasts year’s Fukushima disaster.

The shares dropped as much as 11 percent in Frankfurt, the most in more than a year. The stock traded down 1.75 eurosat 14.80 euros at 12:26 p.m. local time.

EON today reported underlying net income, the profit measure the company uses to calculate its dividend, advanced to 4.04 billion euros ($5.1 billion) in the first nine months from 1.59 billion euros a year earlier. That beat the 3.53 billion euro average estimate of four analysts compiled by Bloomberg. Sales were up 21 percent to 93.6 billion euros from a year earlier.

Economic Uncertainty

Underlying net income rose 11 percent to 722 million euros in the third quarter. Sales were up 15 percent to 28.23 billion euros. Both numbers were calculated by subtracting half-year earnings from nine-month results published today.

EON said yesterday its 2013 forecast of 3.2 billion euros to 3.7 billion euros of underlying net income is no longer achievable. The company is considering cutting dividend payments because of the “substantial economic uncertainties and structural changes in the energy industry.”

The company confirmed its outlook for 2012 profit of 4.1 billion to 4.5 billion euros this year.

‘Disastrous Communication’

“I consider the communication as disastrous,” said Thomas Deser, a portfolio manager at Union Investment GmbH responsible for the fund’s 0.71 percent stake in EON, according to data compiled by Bloomberg. “Even for the dividend there is no reliable lower limit. Shareholders don’t play the same important role for EON as bond holders and rating agencies do.”

RWE AG, Germany’s second-largest utility, reports earnings tomorrow and dropped as much as 4.4 percent in Frankfurt trading.

“The question is by how much EON will reduce the profit forecast and the dividend for 2013,” Sven Diermeier, an analyst at Independent Research GmbH, said by phone from Frankfurt. Ratings agencies may have to look at the company’s credit profile if EON isn’t able to reduce debt as planned, he said.

German power prices for next year have declined 15 percent this year to 47.10 euros a megawatt-hour, according to data compiled by Bloomberg. “That causes difficulty” for EON, while power from offshore wind farms will continue to increase the offer, Deser said. The increase of wind and solar power “pushes RWE and EON out of the business.”

As Germany takes reactors offline, it’s pledged to meet power demand with more fossil-fuel-fired plants and alternative energy. EON is raising investments in renewable-power generation and wants to expand in Brazil and Turkey.

Copyright 2012 Bloomberg

Lead image: Profit drop via Shutterstock


Danger sign

Ethanol Groups Say EPA's Proposal Crushing Growth of Industry

Mario Parker, Bloomberg

An Obama administration proposal last month to cut quotas for renewable fuels led to a rout in ethanol credits and handcuffed the industry’s growth, biofuel groups said Thursday.


Greenpeace Raises Pressure on Internet Companies to Go Renewable

Andrew Burger, Contributor For at least four years, Greenpeace has been raising public awareness and putting pressure on the world's largest data and cloud computing center providers to fuel their operations with clean, renewable power. In May, Gree...
A biogas plant concept from Weltec Biopower

Europe Versus Renewable Energy?

Tildy Bayar, Contributor Wednesday morning’s 'Regulation and the Marketplace' panel discussion at POWER-GEN Europe in Amsterdam got off to a lively start with a presentation from Randy Mott, president of Polish biogas- and geothermal-bas...
Wind turbines

Why It's Time To Get Real About Energy Security

Hannah Smith, Contributor Energy is Europe’s quiet crisis. While the clamour of failing economies, desperate migrants and political clashes grabs the headlines, energy policy is rarely front-page news, but it should be — the statistics are shocking.


Volume 18, Issue 3


To register for our free
e-Newsletters, subscribe today:



Applying Renewable Energy - Online Training

RENAC Online offers a selection of courses on a wide variety of renewabl...

ImagineSolar | Solar PV Project Experience: Advanced 5-day Workshop...

40 Advanced Credit Hours Advanced 5 Day Workshop IREC Accredited Continu...

ImagineSolar | Advanced Lab Day: Solar PV Design & Installation (Au...

Advanced Lab Day: System Design & Installation  $195 – 8 ...


A Baseball Cap, the #ElonEffect, and the Power of a Personal Solar ...

A few weeks ago, I wrote about the Elon Effect in relation to Tesla...

Make Mom Care: A Solar Industry Commencement Speech for the Class o...

Friends, faculty, parents, and graduates of 2015. I’m honored not ...

Nearly 60% of Renewable Energy Conversations on Twitter Are About S...

If you’ve followed this solar marketing blog, you know I’m a...


Tweet the Editors! @megcichon @jennrunyon


Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now