E.ON renewables eyes 2010 oper profit jump

HUSUM, Germany Wed Sep 22, 2010 7:28am EDT

HUSUM, Germany (Reuters) - E.ON, the world's largest utility by sales, is confident it can grow operating profit at its renewables unit by about 70 percent this year, benefiting from a massive increase in installed capacity.

"We will power ahead with this business," Frank Mastiaux, chief executive of E.ON's Climate & Renewables unit, told Reuters late on Tuesday in an interview at a wind conference in the hamlet of Husum, about a 90-minute drive north of Hamburg.

"Given the growth rates we have seen in the previous years, I wouldn't be surprised if our adjusted EBIT comes in close to a quarter of a billion euros," he added, equivalent to a year-on-year rise of about 70 percent.

E.ON's climate and renewable unit generated adjusted earnings before interest and tax (EBIT) of 146 million euros ($191.7 million) in 2009, more than twice the 66 million generated in 2008, accounting for a tiny part -- about 1.5 percent -- of E.ON's total 2009 adjusted EBIT.

E.ON had forecast a "significant increase" in generation capacity of its renewable energy unit, without predicting the division's profit. The segment is part of the "new markets" division, for which E.ON expects lower adjusted earnings before interest and taxes in 2010 than in 2009.

The company has so far spent 6 billion of the 8 billion euros earmarked for expanding renewables in 2007-2011, said Mastiaux, 46, who previously led BP's liquid gas business.

E.ON, Germany's biggest producer of renewable energy, aims to increase renewable energy's share to about a third of installed capacity by 2030 from about 13 percent in 2008 as governments seek to cut dependency on fossil-fuel-based power.

E.ON said separately it expected adjusted net profit to be burdened by between 700 million and 1 billion euros annually in the coming six years, mainly due to taxes on nuclear fuel.

Its shares fell 1.1 percent to 21.70 euros by 1106 GMT, outpacing a 1.5 percent drop in the STOXX Europe 600 Utilities index.

SIZE MATTERS

Mastiaux -- who was born in Essen, once Germany's hub for coal and steel production -- confirmed that the unit's installed capacity would grow to 10 gigawatts (GW) by 2015 from about 4 GW expected by the end of 2010.

Large utilities and industrial conglomerates such as Siemens and RWE have been very selective about the areas they chose to emphasize in their renewable strategy.

Most aim for large plant-sized projects since they seem a better fit than small solar roof-top installations, a field dominated by players such as SolarWorld, Q-Cells and Centrosolar.

"We're the wrong company for that," Mastiaux said, adding his focus was on large wind parks and solar thermal plants.

The Global Wind Energy Council (GWEC) estimates that globally installed wind capacity will reach 409 GW by 2014, compared with 159 GW at the end of 2009.

Smaller players such as Vestas, the world's biggest maker of wind turbines, and Germany's Nordex have been hit by order delays as financing for wind parks dried up during the financial crisis.

This has sparked speculation about sector consolidation, but Mastiaux said M&A was not a major topic for the unit. "(But) one cannot rule out that we will make selective acquisitions."

(Editing by Michael Shields)

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