OREANDA-NEWS. “E.ON stands at the beginning of a far-reaching transformation. Some 15 years ago E.ON underwent a metamorphosis, changing from a conglomerate into a pure-play energy company. Now we’re sharpening our business profile even more. Our objective is to make E.ON into a leading company of the distributed, renewable, and digital energy world.” These are the words E.ON CEO Johannes Teyssen used to describe the course the Essen-based energy company will take after spinning off its conventional power generation and trading businesses. The entire E.ON Management Board was on hand to present the company’s new strategic and finance plan to capital market analysts in London.

Spinoff represents logical response to the emergence of two energy worlds

Teyssen reiterated E.ON’s determination to carry out the spinoff as planned. “Even in view of the further deterioration of our market environment, we remain convinced that the spinoff is the right thing to do at the right time,” Teyssen said. “It’s right for us to divide our operations into two companies and to enable them to develop their respective businesses in line with their own strategy. This sharper focus will enable E.ON and Uniper to better meet their respective challenges and systematically seize development opportunities.”

Three-phase transformation

E.ON’s transformation will have three phases. 2016 will be a transitional year in which E.ON plans to complete the spinoff of Uniper pending the approval of the Annual Shareholders Meeting on June 8, 2016. It also intends to list about 53 percent of Uniper shares on the stock market later this year. Going forward, E.ON will focus on highly profitable, stable, and largely regulated businesses: energy networks, customer solutions, and renewables. The new E.ON’s objective is to use this platform to tap new growth opportunities in its core businesses.

Predictable dividend policy

After confirming its planned dividend for the 2015 financial year at the time it presented its results for the year, E.ON will continue to provide its owners with a predictable dividend policy for the medium term. E.ON currently plans to pay out 40 to 60 percent of its underlying net income.

Focused and disciplined transformation phase

CFO Michael Sen emphasized the significance of a solid capital structure for the success of E.ON’s repositioning. “The upheavals in our market environment have already left a substantial mark on our balance sheets in the past. The planned spinoff will also have a significant impact. That’s why our first step will be to lay the foundation for stable and profitable growth for the long term.” E.ON’s focus on three core businesses will be accompanied by strict financial discipline: “As we weigh investments, we’ll focus more on value creation and always keep our eye on the implications for our balance sheet. Our overarching objective is to establish E.ON as a leading company in the new energy world.”

2016 outlook largely confirmed

As announced in March, the planned spinoff makes it necessary for E.ON to adjust its outlook for 2016 owing to the accounting treatment of Uniper. The outlook presented by Sen essentially confirms the earlier outlook. E.ON expects its EBITDA to be between €4.6 and €5 billion and its EBIT—which will be the company’s new key earnings figure—to be between €2.7 and €3.1 billion. Underlying net income is expected to be between €0.6 and €1 billion.

Stable, low-risk businesses

Just under two thirds of E.ON’s future earnings will come from regulated and quasi-regulated businesses, significantly more than currently. They will also have significant less exposure to risks from the fluctuation of commodity prices and exchange rates. “A high degree of earnings stability is a good way to get E.ON back on a growth path,” Sen emphasized.

New medium-term finance plan

E.ON’s medium-term finance plan is designed to earn the trust of capital markets. Its objective is to create lasting value through disciplined capital allocation, capital efficiency, a clear cash-flow orientation, and earnings growth. E.ON aims for a capital structure that supports a BBB+/Baa1 rating. The objective for the next few years is for E.ON’s EBIT to be at least stable und to achieve a high cash conversion rate. E.ON wishes to achieve a return on capital employed of 8 to 10 percent and to continually improve its earnings per share by 5 to 10 percent per year.