Structural shake-up in store for EON

The head of German energy giant EON is preparing the company for a radical restructuring course – including sell-offs or mergers for less profitable sectors, according to a Saturday news report.

Structural shake-up in store for EON
Photo: DPA

According to news magazine Der Spiegel, all branches of the company – which is Germany’s largest energy provider – are set to come under close scrutiny over the next two to three years. Any areas that fail to meet management’s profit goals could be up for negotiation – including the company’s gas grid or its sprawling power distribution grid.

EON spokesman Carsten Thomsen-Bendixen would not comment on the plans Sunday, saying the company’s supervisory board was due to discuss them the following day.

Company CEO Johannes Teyssen is set to present his new corporate strategy on Wednesday, along with the company’s third-quarter results.

Under EON’s plan, the billions gained from company sell-offs would reportedly be invested in high-growth markets outside of Europe, such as China or Brazil. Some of those funds could also be used to cover potential profit losses in the coming years.

According to company calculations, EON expects that pre-tax profits could drop up to 30 percent without decisive action – despite generally good results for 2010.

Teyssen has been charting a course for the company that is markedly different from that of his predecessor, Wulf Bernotat – including an almost complete reshaping of the company’s board. For the first time ever, EON’s management team now includes both a woman, Regine Stachelhaus, and a non-German, Jørgen Kildahl of Norway.

The company has also given the German government clear signals on the nuclear power debate – and in August pressed Chancellor Angela Merkel to live up to her promise to extend the life of some of the country’s nuclear plants.

“There has long been a lack of clarity about the direction of Germany’s energy policy,” chief executive Johannes Teyssen said. “This needs to change.”

DPA/The Local/AFP/arp

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.