E.ON Boosts Investment in Renewables as European Energy Market Continues to Show Weakness

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Researched by Industrial Info Resources (Sugar Land, Texas)--E.ON (Dusseldorf, Germany) reported sharp losses for the first nine months of 2014, weighed down by weak power prices across Europe and overwhelming political pressure to reduce the role of nuclear power. Still, the company sees a bright future in renewables and has been reaffirming its commitment with several high-profile projects. The company reported a net loss of 14 billion euros ($17.45 billion), compared with net gains of 2 billion euros ($2.49 billion) in the first nine months of 2013.

Industrial Info is tracking almost $40 billion in active projects involving E.ON, including the decommissioning and dismantlement of two nuclear power plants in Germany: the 1,345-megawatt (MW) plant in Stadland, and the 912-MW plant in Essenbach. Both processes are in the permitting stage and are set to begin in 2016. Germany is planning to transition away from nuclear power, which has led to numerous long-term, high-value projects to decommission and dismantle plants across the country. For more information, see August 27, 2014, article - Germany: Gas Power Falls as Renewable Energy Surges, and May 21, 2014, article - Germany Sets New Renewable Energy Record.

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Total sales for E.ON Group stood at 81.35 billion euros ($101.46 billion), an 8.93% decrease from the first nine months of 2013. The eurozone is facing a swath of economic challenges, the difficulty of which is reflected in the negative growth numbers found across the continent--including lower power prices, spurred in part by an oversupply of electricity in Germany. But despite this and the planned nuclear plant closures, E.ON has managed to add customers in Germany on a net basis so far this year.

The company also is progressing on its investments in renewables, especially wind power: Industrial Info is tracking almost $20 billion in active E.ON projects in the wind sector, including the $1.2 billion Arkonabecken Suedost Offshore Windfarm, which is located near Bergen, Germany. The project involves using 80 wind turbine generator sets, each with about 6 MW capacity, and is set to kick off construction roughly a year from now.

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Such projects are not limited to Germany. The company is at work on the $1.13 billion Humber Gateway Offshore Windfarm near Grimbsy, England. The project, which is set to finish construction in the second quarter of 2015, involves building 73 structural steel towers, each with a 3-MW wind turbine generator set from Vestas Wind Systems (Aarhus, Denmark).

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Earnings before interest expenses, income taxes, depreciation and amortization (EBITDA) increased for E.ON's wind, solar and other renewables 17%, although this was unable to offset the absence of earnings from recently divestments, such as its Hungarian and Slovakian gas businesses, and several properties in Finland. Adverse currency effects also were a factor.

"As anticipated, our nine-month EBITDA of 6.6 billion was €0.5 billion below the prior-year figure," said Klaus Schafer, the chief financial officer of E.ON, in a conference call. "On a like-for-like basis, factoring out changes to our portfolio and currency-translation effects, our earnings were actually above the prior-year level. Higher earnings at Generation, Exploration & Production, and Renewables [segments], along with additional cost savings delivered by our E.ON 2.0 program, had a positive impact on earnings. However, these factors were more than offset by price, volume and regulatory effects."

E.ON executives maintained expectations that full-year 2014 EBITDA would be between 8 billion and 8.6 billion euros ($9.98 billion and $10.73 billion), and that underlying net income (which adjusts for "extraordinary effects") would be between 1.5 billion and 1.9 billion euros ($1.87 billion and $2.37 billion).

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.