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  • bluecheese4u bluecheese4u Feb 16, 2013 2:53 PM Flag

    E.ON meets expectations for 2012 and adjusts 2013 forecast to reflect altered business environment

    E.ON meets expectations for 2012 and adjusts 2013 forecast to reflect altered business environment

    01/30/2013 | Posted in: Finance

    2012 EBITDA expected to be €10.8 billion, in line with forecast
    Dividend of €1.10 per share for 2012 financial year confirmed
    2013 forecast: EBITDA expected to be €9.2 - €9.8 billion, underlying net income €2.2 - €2.6 billion
    E.ON SE, Düsseldorf, today presented information about its main 2012 earnings figures and its revised 2013 forecast. CEO Dr. Johannes Teyssen and CFO Dr. Marcus Schenck also explained what consequences the radical changes in Europe’s power generation business will have on E.ON’s strategy. In addition, Teyssen announced that the company would focus its investments even more strictly on its growth businesses: distributed energy, renewables, and markets outside Europe.

    On the basis of preliminary, unaudited numbers, E.ON expects its 2012 EBITDA to be €10.8 billion, a 16-percent increase from the prior-year figure of €9.3 billion. In part, the increase reflects non-recurring effects, such as the successful renegotiation of gas procurement contracts with producers and the absence of the adverse impact of Germany’s amended Nuclear Energy Act recorded in 2011. Preliminary earnings are therefore in line with the forecast of €10.4 to €11 billion.

    E.ON’s underlying net income is also higher, rising from €2.5 billion in 2011 to an expected level of about €4.3 billion in 2012. This increase is slightly more than with EBITDA mainly because of lower amortization charges and lower interest expenses. This earnings figure is also expected to be in line with E.ON’s 2012 forecast of €4.1 to €4.5 billion.

    This yields underlying earnings per share of about €2.2. As planned, E.ON will therefore recommend to its Annual Shareholders Meeting in May that the company pay out a dividend of €1.10 per share.

    Owing to the significant deterioration of the business environment of Europe’s energy industry, E.ON announced last November that it was revising its 2013 earnings forecast. E.ON now expects its 2013 EBITDA to be between €9.2 and €9.8 billion. This forecast is already adjusted for the substantial earnings streams that E.ON will lose through its ongoing divestment program. The other main earnings factors will be the midstream gas business’s return to a normal earnings level and the generation business’s reduced profitability.

    E.ON expects its 2013 underlying net income to be between €2.2 and €2.6 billion. This is due to the above-mentioned EBITDA factors along with a normalization of the economic interest result and an expected higher tax rate.

    As announced in November, going forward E.ON will no longer have an absolute dividend target but instead return to a target payout ratio, which will again be 50 to 60 percent of underlying net income.

    E.ON also explained that because of the radical changes in Europe’s energy industry the company will implement its strategy even more swiftly and decisively and adjust parts of it. The unmanaged growth of renewables and the resulting collapse of the EU emissions trading scheme are making in particular gas-fired power plants in Europe—which had already been hit by the recession-driven decline in power demand—largely uneconomic to operate. There must be adequate compensation for maintaining this capacity, which ensures the reliability of the power supply. E.ON will restructure its conventional generation business in ways that will swiftly improve the competitiveness of its generation fleet. Along with further cost reductions and efficiency improvements, E.ON is studying whether to close power plants in Europe.

    In addition, E.ON announced that during its transformation phase it will focus its investments, which on balance will decline going forward, even more strictly on its growth businesses. These include, in particular, distributed generation (a business E.ON intends to expand rapidly), renewables, and markets outside Europe, such as Russia and Turkey. Teyssen made clear that he intends to make E.ON’s transformation to be even faster and more decisive and to rapidly increase growth businesses’ share of the company’s earnings.

    This press release may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON SE does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments.


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    • 'Gas oversupply to push energy prices down this decade'

      Published: 12 February, 2013, 23:58
      Edited: 13 February, 2013, 16:52

      The commodity cycle has peaked and so have energy prices. With technological innovations taking over, new cheaper sources of energy are appearing, driving prices down, Kingsmill Bond from Citigroup believes.
      The shale gas revolution, started in the US, is likely to spread much more widely, dramatically changing global energy markets. This will have two principal consequences, strategist Kingsmill Bond at Citigroup said, speaking with RT Business:
      “First of all it's the shift of dynamics to the East, but that's less significant from our perspective. The second consequence is that we believe there will be a structural shift to lower energy prices, and of course that has huge implications for the market in Russia.”
      The Russian government's dependency on oil and gas has increased over the last ten years along with growing prices, turning Russia into more of a petro-state than ever before. But the main concern for the Russian market is that hydrocarbon prices are extremely high. "The fear is that if we've reached a peak and hydrocarbon prices trend downwards, that will definitely have a negative impact on the Russian stock market.” So will the shale gas trend mean disastrous consequences for petro states alike?
      “We're not talking about the collapse of hydrocarbon prices, we are talking about a gentle drift down – we believe that medium-term prices will not be lower than $70-80. This is a level at which the Russian economy can effectively operate, and the same with gas. We believe that European gas prices will settle at about $9 dollars per mln BTU, which would be a bit negative, but not catastrophic,” Kingsmill Bond reassures.
      However, the Russian government should review its budget policy and not depend it on high oil prices so much, Mr Bond warns.
      “That clearly bears risks. It would be sensible to find other buyers for the sale of gas, for example in Asia. It's not wise to believe that the current oil and gas prices will remain the same forever.”
      Energy prices have passed the point of no return to historic highs, thanks to not only the shale gas revolution, but also other factors. The technological boom is among them and directly affects the demand for traditional energy sources.
      “And at the same time don't forget that the demand for oil in the OECD, it's now falling and it's been falling for a number of years. We believe that that process will accelerate both as the car fleets become more efficient and gas now takes over as a heavy transport fuel and consequently helps to reduce oil demand in the OECD,” Bond told RT.
      Falling gas prices drag down oil prices – in the United States the price of natural gas is now just 20% of the price of oil and the trend is likely to continue. The reason behind this is the economic incentive for oil consumers to make a switch to gas.
      “What we now see is a significant shift in the US trucking industry to use natural gas-powered trucks. We expect that by the end of the decade one third of the US trucking industry would have switched from diesel to natural gas. That's just one country but that's around 1.6 million barrels per day,” Kingsmill explains. “It's symptomatic for wider shifts, for example shipping, railways, all heavy transport – we believe that all of them will shift away from expensive oil to much cheaper natural gas.”


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