Better first quarter results for largest German utilities

Financial Earnings improvements for E.ON and RWE due to one-off effects.

Both E.ON and RWE, the two leading German energy companies, report increased results for the first quarter 2016. While earnings from the traditional operations in both companies remain under pressure, one-off effects lead to earnings improvements for the first-quarter results.

E.ON, Germany’s leading energy company, reported increased EBITDA from €2.8 billion in Q1 2015 to €3.1 billion in Q1 2016. Underlying net income also rose by €300 million to €1.3 billion. The earnings improvement is attributable to a nonrecurring positive effect resulting from the agreement with Gazprom to adjust the terms of long-term gas supply contracts. Without this effect, E.ON’s earnings would have been slightly below the figure from the first quarter of the prior year.

For RWE Group, the second largest German energy company, EBITDA rose 5% to €2.3 billion, and its operating result was up 7% to €1.7 billion. This was partly attributable to energy trading, which made an unusually high earnings contribution: the operating result for the Trading/Gas Midstream Division increased to €166 million (previous year €7 million). As expected, the operating result in the conventional power generation business dropped considerably, falling by 20% to €354 million. The main reason for this is that lower wholesale prices were realised for electricity generation than in 2015. Net debt increased from €25.1 billion to €27.9 billion, primarily due to negative free cash flow. Changes in market interest rates also made it necessary to increase provisions for pensions compared to the end of 2015.

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