E.ON's Results Are in Line with Expectations
OREANDA-NEWS. As anticipated, EBITDA and underlying net income below the prior-year figures.
Low capacity utilization in traditional generation business
Further expansion of renewables business
Forecast confirmed: full-year 2013 EBITDA still expected to be between €9.2 and €9.8 billion, underlying net income between €2.2 and €2.6 billion
Midway through 2013 E.ON's business performance continues to be in line with its expectations. Its first-half sales of €64.6 billion were slightly below the prior-year level. E.ON's first-half EBITDA declined by 15 percent to €5.7 billion. Cost savings delivered by the company's E.ON 2.0 program and higher earnings at its Renewables and Exploration & Production segments had a positive impact on earnings but were more than offset by the absence of earnings from divested companies and the effect of the current market situation in fossil-fueled power generation. In particular, E.ON's power generation business in Europe is suffering from low capacity utilization and low wholesale prices as a result of Europe's economic crisis and interventionist energy policies and regulations.
E.ON's underlying net income declined by €1.4 billion, or 42 percent, to €1.9 billion, primarily because its EBITDA was lower and its tax rate was higher.
E.ON is making good progress transforming itself into an international provider of energy solutions. In July it officially inaugurated London Array, the world's largest offshore wind farm, and has begun building Amrumbank West wind farm in the German North Sea. E.ON now has more than 5 gigawatts of wind and solar capacity; including its hydro assets, the company has nearly 11 gigawatts of renewables capacity in operation. In E.ON's distributed-generation business, in Germany the first small-scale CHP units of its partnership with Metro entered service. In addition, Evonik hired E.ON to install a state-of-the-art combined-cycle gas turbine (CCGT) to supply energy to Marl Chemicals Park.
As part of the restructuring of its regional business in Germany, E.ON has, as planned, sold E.ON Thuringer Energie and E.ON Westfalen Weser and expects to complete the sale of E.ON Mitte around New Year. Going forward, E.ON will focus on four regional utilities in Germany. It is also restructuring its network and sales businesses in Germany with the aim of enhancing customer orientation.
E.ON's business outside Europe is developing well. After achieving success with its power generation business in Russia, the company is moving forward with its entry into the Turkish market. Enerjisa, E.ON's German-Turkish joint venture with Sabanc, entered the winning bid for the power distributors for the Toroslar and Ayedas regions in a government-run auction to privatize Turkey's power networks. The acquisition process for Ayedas was completed at the end of July 2013; that for Toroslar should be completed by the end of September. In its three distribution territories - Baskent, Ayedas, and Toroslar - Enerjisa will supply energy to 20 million people, nearly one quarter the country's population, making Turkey the E.ON market with the most customers. In May, Enerjisa commissioned Turkey's largest wind farm and recently made the decision to build a 600 megawatt CCGT in Bandirma in northwest Turkey. With a fuel efficiency of more than 60 percent, it will be the country's most efficient fossil-fueled power plant.
The E.ON Group's first-half investments totaled roughly €4.5 billion. Its operating cash flow of €4.1 billion was considerably higher than the prior-year figure of €2.5 billion. The main positive factor was that in the first quarter of 2012 E.ON paid a withholding tax on an intragroup dividend distribution. The tax was refunded in full in the third quarter of 2012. Compared with the figure recorded at December 31, 2012 (-€35.9 billion), E.ON's economic net debt declined by €2.6 billion to -€33.3 billion. The main reason for the improvement was that significant proceeds from divestments and positive operating cash flow were fully sufficient to cover our investment expenditures and E.ON SE's dividend payout. A reduction in provisions for pensions also helped reduce E.ON's economic net debt.
E.ON continues to expect its full-year 2013 EBITDA to be between €9.2 and €9.8 billion. This forecast factors in the loss of earnings streams through asset sales under the company's ongoing divestment program. E.ON continues to expect its 2013 underlying net income to be between €2.2 and €2.6 billion.
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