New Funding

E.ON Raises €1.35 billion with Capital Increase

German Chancellor Merkel Visits RWE Nuclear Power Plant
E.ON raises more than a billion euros with new capital measures. Source: Bloomberg

Energy company E.ON has taken to the capital market after a record loss in 2016. With the issuance of around 200 million shares, the utility collected €1.35 billion ($1.45 billion) overnight, the company announced Thursday. With the proceeds of the 10-percent capital increase, E.ON intends to finance part of its total contribution of €10 billion to a public fund that will cover the costs of Germany’s nuclear-power phaseout.

E.ON CEO Johannes Teyssen had already announced capital measures of up to €2 billion. In addition to a capital increase of up to 10 percent, he also mentioned hybrid securities could be an option. With the  €2 billion, he wants to finance the risk surcharge that E.ON has to pay for the nuclear phaseout in addition to another €8 billion for the public nuclear fund.

The federal government has agreed to take over the storage of nuclear waste in exchange for the major nuclear power companies covering the costs through a €23.6 billion fund. Germany aims to completely phase out nuclear power by 2022.

The utility has been struggling since spinning off Uniper as a wholly separate entity in the beginning of 2016, letting Uniper handle coal and gas-fired power, while E.ON focuses on renewables.

Depreciation and liabilities from the nuclear phaseout put deep holes in E.ON’s balance sheet in 2016. The Group reported a record loss of €16 billion on Wednesday.

E.ON had to write off billions at its coal and gas spin-off Uniper SE, which debuted on the stock market last year. In addition to losses with its nuclear power, the company is burdened by hefty pension obligations.

The utility has been struggling since spinning off Uniper as a wholly separate entity in the beginning of 2016, letting Uniper handle coal and gas-fired power, while E.ON focuses on renewables. Both Uniper and E.ON staggered at first with the split, but Uniper’s stock has since recovered from €4 to €14.

The new shares were offered exclusively to institutional investors. The placement price should be between €6.71 and the Xetra closing price of €6.83, as evidenced by a memo from the Bank of America accompanying the transaction.

 

Stuart Tiffen is an editor with Handelsblatt Global.

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