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E.ON: Business Worse Than Expected

EON CEO Johannes Teyssenon March 9 2016 annual results presentation in Essen Source Reuters
Tough times for E.ON's chief executive Johannes Teyssen.
  • Why it matters

    Why it matters

    E.ON still needs to show it can make its power generation operations profitable again.

  • Facts

    Facts

    • German wholesale electricity prices have dropped by a third since January 2015 due to a glut of renewable energy supply.
    • Fossil fuel power generation by E.ON, RWE, Vattenfall and EnBW has become less profitable or loss-making.
    • Germany in 2011 announced plans to phase out nuclear energy by 2022 and draw at least 80 percent of energy from renewables by 2050.
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    Audio

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Germany’s largest utility E.ON on Wednesday warned of declining earnings as its business slows faster than expected on plunging electricity and gas prices.

The utility, based in Essen, said it expected operating profit to fall by up to 21 percent this year from its level in 2015. Its shares fell as much as 2.5 percent in Frankfurt.

E.ON plans later this year to spin off its conventional gas and coal power generation businesses from its renewables business as Germany moves ahead with its forced shift into alternative energy. German Chancellor Angela Merkel decided in 2011 to shut down nuclear power plants by 2022 following Japan’s Fukushima disaster and increase the share of renewable energy production.

“The difficult market environment will cause, in particular, free cash flow to be below earlier assumptions; future investments and dividends will have to reflect this,” E.ON said in a statement.

The glut of government-subsidized solar, wind and renewable power has pushed down German wholesale electricity prices by a third since the start of 2015, hitting E.ON and rivals RWE, Vattenfall and EnBW. RWE, which is also splitting operations, announced a €170-million loss on Tuesday.

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