DIFFICULT TIMES FOR ENERGY COMPANIES

EUROPE Interim reports from several European utilities showcase the hard times the energy business is suffering from. On Wednesday 11 November Eon reported its biggest quarterly net loss since its creation in 2000.

On Thursday (12 November) RWE reported that the group’s EBITDA was down 6% to 4.4 billion euro and its operating result decreased by 9% to 2.6 billion euro in the first three quarters of 2015. The main reason for this was the price-induced shrinkage of margins in conventional electricity generation.

Germany's second-biggest utility said it still expected to achieve adjusted net income of 1.1-1.3 billion euros in 2015, "even if only just".

RWE’s CEO Peter Terium said:
“The development of our share price has been anything but pleasing in 2015. RWE common shares lost about half of their value in the first ten months. There are various reasons for this, which are not at all limited to the low wholesale electricity prices. The capital market was unpleasantly surprised by the negative developments experienced in our UK supply business. Substantial customer losses and billing problems are not good for RWE’s reputation, but we are working hard to deal with these difficulties and find a solution.”

Biggest net loss
Germany's biggest utility E.ON announced an 8.3 billion euro writedown on the value of its power plants and oil and gas business on Wednesday (11 November). The writedown, equivalent to nearly half of Eon’s entire stock market value, drove the company to its biggest quarterly net loss since its creation in 2000.

E.ON’s CFO Michael Sen said:
“We recorded these charges, which totalled 8.3 billion euro, primarily on goodwill and other assets. The impairment charges were triggered by the significant decline in commodity and energy prices, which is mainly a result of structural changes on global energy markets and on the regulatory framework. Our operating environment remains very difficult.”

E.ON owns 29,6% of the shares in Ringhals nuclear power plant in Sweden, 9,9% of the Forsmark nuclear power plant and 54,5% of the Oskarshamn nuclear power plant.

“Strongly burdened”
On 22 October state-controlled Finnish utility Fortum reported lower-than-expected quarterly earnings and pushed back its profit target in Russia, one of its key markets, due to weak electricity demand.
The group's third-quarter comparable operating profit fell 46 percent from a year ago to 79 million euros.

Fortum’s CEO Pekka Lundmark said:
“The third-quarter results were also strongly burdened by a non recurring impact from the decision by OKG AB's extraordinary shareholders' meeting to close two of the oldest Oskarshamn nuclear units in Sweden before the end of their planned operational lifetimes.”

Related information
Reuters: “Eon's $8.9 bln writedown shows spin-off challenges”
Eon interim report
Reuters: “RWE to barely reach net profit forecast on power woes”
Fortum interim report

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