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ENERGY

E.ON say profits hit by tricky conditions

Germany's biggest power supplier E.ON said Wednesday it was projecting a sharp drop in bottom-line profits this year as a result of the difficult industry environment and divestments.

E.ON say profits hit by tricky conditions
Photo: DPA

E.ON said in a statement it forecast “underlying” net income of between €2.2 billion and €2.6 billion for 2013, down from €4.3 billion it managed in 2012.

The decline would be due to “the significant deterioration of the business environment of Europe’s energy industry” and also took into account the “substantial earnings streams that E.ON will lose through its ongoing divestment programme,” the statement said.

For 2011 E.ON had actually booked a net loss of €2.2 billion, but after this was adjusted for one-off effects such as divestments, the group made an “underlying” net profit of €2.5 billion.

Operating profit was projected to fall to between €9.2 billion and €9.8 billion in 2013 after rising by 16 percent to €10.8 billion in 2012, the company calculated.

E.ON also said it planned to pay shareholders a dividend of €1.10 for 2012, up from €1.0 per share the previous year. But it declined to give any dividend forecast for 2013.

E.ON said it had to re-think its strategy given the “radical changes in Europe’s energy industry.”

“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,” the group explained.

E.ON therefore called for “adequate compensation for maintaining this capacity, which ensures the reliability of the power supply.”

But it said it would restructure its conventional generation business in such a way as to “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,” it said.

E.ON said it would focus its investments even more strictly on growth areas, such as renewables, and markets outside Europe like Russia and Turkey.

AFP/hc

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ENERGY

German government announces fresh relief package for high energy costs

With Russia's invasion in Ukraine exacerbating high energy and petrol prices, Germany is set to introduce a second relief package to limit the impact on consumers.

German government announces fresh relief package for high energy costs

The additional package of measures was announced by Economy and Climate Protection Minister Robert Habeck (Greens) on Sunday.

Speaking to DPA, Habeck said the wave of price increases throughout the energy sector were becoming increasingly difficult for households to bear.

“Extremely high heating costs, extremely high electricity prices, and extremely high fuel prices are putting a strain on households, and the lower the income, the more so,” he said. “The German government will therefore launch another relief package.”

The costs of heating and electricity have hit record highs in the past few months due to post-pandemic supply issues. 

This dramatic rise in prices has already prompted the government to introduce a range of measures to ease the burden on households, including abolishing the Renewable Energy Act (EEG) levy earlier than planned, offering grants to low-income households and increasing the commuter allowance. 

READ ALSO: EXPLAINED: What Germany’s relief package against rising prices means for you

But since Russia invaded neighbouring Ukraine on February 24th, the attack has been driving up energy prices further, Habeck explained.

He added that fears of supply shortages and speculation on the market were currently making the situation worse. 

How will the package work?

When defining the new relief measures, the Economics Ministry will use three criteria, Habeck revealed. 

Firstly, the measures must span all areas of the energy market, including heating costs, electricity and mobility. 

Heating is the area where households are under the most pressure. The ministry estimates that the gas bill for an average family in an unrenovated one-family house will rise by about €2,000 this year. 

Secondly, the package should include measures to help save energy, such as reducing car emissions or replacing gas heating systems.

Thirdly, market-based incentives should be used to ensure that people who use less energy also have lower costs. 

“The government will now put together the entire package quickly and constructively in a working process,” said Habeck.

Fuel subsidy

The three-point plan outlined by the Green Party politician are not the only relief proposals being considered by the government.

According to reports in German daily Bild, Finance Minister Christian Lindner (FPD) is allegedly considering introducing a state fuel subsidy for car drivers.

The amount of the subsidy – which hasn’t yet been defined – would be deducted from a driver’s bill when paying at the petrol station. 

The operator of the petrol station would then have to submit the receipts to the tax authorities later in order to claim the money back. 

Since the start of the war in Ukraine, fuel prices have risen dramatically in Germany: diesel has gone up by around 66 cents per litre, while a litre of E10 has gone up by around 45 cents.

READ ALSO: EXPLAINED: The everyday products getting more expensive in Germany

As well as support for consumers, the government is currently working on a credit assistance programme to assist German companies that have been hit hard by the EU sanctions against Russia.

As reported by Bild on Saturday, bridging aid is also being discussed for companies that can no longer manage the sharp rise in raw material prices.

In addition, an extension of the shorter working hours (Kurzarbeit) scheme beyond June 30th is allegedly being examined, as well as a further increase in the commuter allowance.

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