DUSSELDORF: EON SE’s first-quarter profit jumped after a one-time adjustment of a natural gas contract with Gazprom PJSC, beating analyst forecasts.
The agreement with Gazprom ended a two-year long arbitration process in March and enabled EON to cancel some provisions recorded in earlier years, boosting first-quarter earnings by about 400 million euros ($456 million), the Essen, Germany-based utility said Wednesday in a statement.
Underlying net income rose to 1.31 billion euros in the three months through March, beating the 1.28 billion-euro average estimate of 7 analysts surveyed by Bloomberg. Revenue fell 12 per cent amid a slide in power prices.
The utility shifted its fossil-fuel plants and trading into a separate company called Uniper on Jan. 1. The move is one of the most radical responses yet to Germany’s shift toward wind and solar generation, a policy that’s undermining power prices and hurting profitability at traditional utilities. The revamped version of the company is focusing on renewables, networks and retail consumers.
“Our first-quarter results indicate that parts of our traditional operating business remain under pressure,” Chief Financial Officer Michael Sen said in the statement. “That’s why it’s all the more important that since the start of the year EON’s transformation has moved forward according to plan.”
Most of the company’s conventional power-plant business that weighed heavily on earnings as wholesale rates crashed will be listed on the Frankfurt Stock Exchange as early as August. EON is targeting underlying net income of as much as 1 billion euros this year after spinning off its Uniper unit, it said last month. The utility will list 53 per cent of the new unit, pending approval at a shareholder meeting on June 8.
Net debt fell 4.1 per cent to 26.6 billion euros. The utility reiterated its forecast for underlying net income of 1.5 billion euros to 1.9 billion euros for the whole group this year.
“The one-time effect of the Gazprom deal and the traditionally strong first quarter ensure that the full-year profit forecast has already been largely achieved,” Ingo Becker, an analyst at Kepler Cheuvreux, said by phone from Frankfurt.
EON fell 1.8 per cent to 8.35 euros at 9:23am in Frankfurt. The stock dropped 6.2 per cent this year.
EON is also working on solutions on how to fund the exit from nuclear energy and the cost of storing atomic waste. Sen said on a conference call that the company wasn’t ruling out accessing capital markets, while many questions still needed to be answered in regards to the proposal by Germany’s government-assigned commission.
The new EON plans about 10 billion euros of capital expenditure through 2018 and targets starting a new offshore wind park every second year, according to presentations at its capital market day in London last month. It’s expecting continuous earnings-per-share growth of 5 per cent to 10 per cent a year.
“These results are no more satisfying than those of any company in our industry,” Chief Executive Officer Johannes Teyssen said in a letter to shareholders. “But they also demonstrate that EON can deliver a solid performance in a difficult environment.”
RWE AG, Germany’s biggest power producer, is scheduled to report first quarter earnings on Thursday.
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