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.