WRAPUP 2-E.ON, International Power see recovery signs

Wed Nov 11, 2009 8:39am EST

Related Topics

* E.ON raises forecast for 2009 adjusted net income

* International Power ups 2009 profit outlook

* Scottish & Southern sees no UK demand recovery in 2010

* E.ON stock up 1.8 pct, IP up 3.9 pct, S&S down 1.6 pct (Adds earnings details, company comment)

By Peter Dinkloh and Victoria Bryan

FRANKFURT/LONDON, Nov 11 (Reuters) - E.ON (EONGn.DE), the world's largest utility, and power-station owner International Power IPR.L forecast a tentative pickup in demand for power as economies start to recover from the global downturn.

Germany's E.ON and UK-based International Power, which has interests in power stations around the world, raised their earnings forecasts on Wednesday and joined Czech power provider CEZ CEZsp.PR and U.S. utilities American Electric Power (AEP.N) as well as Duke Energy (DUK.N) in reporting indications of a recovery. [ID:nL0728161] [ID:nLB423819] E.ON said it is seeing the first signs of an end to shrinking power demand while International Power said continental Europe and its Australian businesses were ahead of expectations. "Many indicators suggest that the worst part of the crisis is behind us," said E.ON Chief Financial Officer Marcus Schenck.

"In Germany we are seeing it in the amount of power that's flowing through our power grids," he said

Both companies singled out the UK as a weak market, reinforced by comments from the chief executive of British utility Scottish & Southern (SSE.L) who said he does not see a recovery there in 2010 and sluggish demand for at least another 12 to 18 months.

E.ON and International Power's more optimistic outlooks bucked the trend of more gloomy forecasts from other European rivals such as Sweden's Vattenfall [VATN.UL], Austria's Verbund (VERB.VI) and Italy's Edison EDN.MI.

Industrial production -- a measure for the demand for power -- in the 27 countries of the European Union in August 2009 was 8 percent below the levels of 2005, according to the statistics office of the European Union, demonstrating the scale of the economic downturn.

E.ON is benefitting from selling more power ahead of time than other utilities, escaping the price decline which has led power prices in Germany, Europe's largest power market and a benchmark for others, to halve in a year.

The gas business, one of Europe's largest, is also helping E.ON with volumes for the first time this year increasing in the third quarter.

The German utility reiterated its expectations for adjusted earnings before interest and taxes to remain unchanged and increased its expectations for adjusted net income because of lower interest payments.

Net income adjusted for extraordinary effects will drop 3 to 5 percent this year, E.ON said, after previously forecasting a drop of 5 to 10 percent. This is the second time the company has raised its outlook this year.[ID:nL0728161]

International Power said it expects earnings per shares in 2009 to be "broadly in line" with last year. The company had previously warned that 2009 profits would fall because of difficult markets in the U.K. and U.S. [ID:nLA452303]

UK peer Scottish & Southern reiterated its forecast of an increase in adjusted pretax profit for its current fiscal year, as Chief Executive Ian Marchant said energy consumption in Britain and Ireland will not increase before 2013. [ID:nLB423819]

International Power also called the British market "challenging" while E.ON said its profits on the market will be "considerably" lower after previously only expecting earnings to fall.

International Power shares were up 3.9 percent, E.ON shares rose 1.8 percent, while Scottish & Southern was down 1.6 percent at 1335 GMT. The DJ Stoxx utilities index .SX6P rose 0.9 percent.

German utility RWE (RWEG.DE) will report 9-month earnings on Thursday, while EDF (EDF.PA) will release sales figures for the period.

(Writing by Peter Dinkloh; Editing by Erica Billingham)

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