E.ON Weathers Covid-19 Storm
Gas and power demand was down in the first half of the year relative to last year but German utility E.ON expects to recover almost half of its €300 ($353)mn losses related to Covid-19 by 2024, it said August 12.
The networks segment recorded adjusted pretax earnings (Ebit) of roughly €1.7bn, down €250mn from 2019, but of that, about €100mn was due to Covid-19 and another loss came from Sweden, where a new price control period began this year.
The other half of the losses came from its customer business, which has remained largely unaffected by major payment default. The majority resulted from the early sell-back of electricity that had originally been procured for customers but that could not be sold as a result of the lockdown. Relative to the pro forma prior-year figure, the Customer Solutions segment’s adjusted Ebit rose by €14mn to €457mn.
Covid-19’s total irrecoverable adverse impact in 2020 "is thus limited to only about 2% of pre-tax earnings (Ebitda)," it said. For H1, adjusted Ebit dropped from €2.3bn to €2.2bn and adjusted net income fell to €933mn from €1.05bn. E.ON expects 2020 adjusted Ebit to be between €3.6bn-3.8bn and its adjusted net income to be between €1.5-1.7bn, down slightly from €3.9bn-4.1bn and €1.7bn-1.9bn. E.ON also said its dividend payout would rise by up to 5%/yr.
E.ON's sale of its retail businesses in Hungary, the Czech Republic, and Germany, which was a condition imposed by the European Commission for its Innogy deal, has led to agreements with buyers and the disposals will bring in around €1bn. E.ON also expects to deliver the planned synergies from the Innogy transaction of roughly €740mn from 2022 onward and roughly €780mn in 2024, with the loss of up to 5,000 jobs.
“Despite a difficult market environment,” said CEO Johannes Teyssen, “we were able to realise the full value of these attractive retail businesses. From an economic perspective, we’re therefore very satisfied with the sales.”
In late July E.ON edged nearer its purchase of RWE's 49% stake in electricity supplier VSEH’s business in Slovakia, whose government waived its right of first refusal. E.ON will serve 1.5mn customers in Slovakia and become the biggest network operator in a key eastern European market, it said.
CFO Marc Spieker said the Covid-19 crisis affected Ebit but the decline relative to the first half of 2019 was comparatively mild. The main effect is the technical deferral of earnings to subsequent years.
The European Union's and Germany's rescue packages underpinned E.ON’s strategic position by providing €500mn in investments for climate protection and economic stimulus. E.ON wll accordingly spend €200mn more than planned on networks this year.
E.ON has 50 hydrogen projects in Europe and its network companies are making their gas distribution networks hydrogen-ready. By connecting their distribution networks to distributed power-to-gas production facilities and to the planned hydrogen transport network, they aim to mix natural gas with green gases. An E.ON executive is chairing the national hydrogen council.