UPDATE 2-E.ON cuts dividend, closes plants in deep sector crisis

Wed Mar 12, 2014 3:59am EDT

Related Topics

* Sees 2014 EBITDA of 8.0-8.6 bln eur vs 8.4 bln Rtrs poll

* To shut down nearly 13 GW of plant capacity

* Proposes div of 0.60 eur/shr, down from 1.10 eur for 2012

* Sees no indication sector crisis will end soon -CEO (Recasts, adds details on plant closures, shares)

By Christoph Steitz

DUESSELDORF, Germany, March 12 (Reuters) - E.ON, Germany's biggest utility, on Wednesday proposed nearly halving its dividend for 2013 and said it would shut more than a quarter of its power plants in Europe in response to a rise in renewables that has rattled utilities across the continent.

Europe's sixth-largest utility by market value said core profits in 2014 would decline for a third year adding a sector crisis would linger on for the foreseeable future.

"Taking a sober view of what lies ahead, there are few indications that our market environment will rapidly or tangibly improve," E.ON Chief Executive Johannes Teyssen wrote in the group's annual report published on Wednesday.

"As a result, we've decided to decommission nearly 13 gigawatt of capacity," Teyssen said.

E.ON said on Wednesday it expected earnings before interest, tax, depreciation and amortisation (EBITDA) of 8.0-8.6 billion euros ($11-$11.9 billion) this year.

E.ON proposed a dividend of 0.60 euros per share for 2013, down from 1.10 euros paid a year earlier.

Analysts, on average, expected 2014 EBITDA of 8.4 billion euros and a dividend of 0.66 euros per share for 2013.

Shares in the company were indicated 1.2 percent higher in pre-market trade, as E.ON's 2013 EBITDA of 9.315 billion euros, albeit 14 percent lower that in 2012, beat analysts' expectations.

Across Europe, utilities have been surprised by a surge in renewable energy sources, most notably solar and wind, basically replacing power from many gas and coal-fired power plants and leading wholesale power prices to collapse.

The crisis has led French peer GDF Suez to book a 15-billion-euro charge on its power assets, while German rival RWE earlier this month posted its first net loss since 1949.

E.ON, whose shares have tumbled 54 percent over the last four years, trades at 11.0 times estimated 12-month forward earnings, according to Thomson Reuters, below the 13.2 times for the European utility sector.

The company has shed thousands of jobs and sold billions of euros worth of assets to streamline its business and lower its 32-billion-euro net debt pile.

As well as being hurt by the rise in rival renewables, Germany's utilities are grappling with the country's decision to fully abandon nuclear power by 2022.

($1 = 0.7212 euros) (Additional reporting by Geert de Clercq in Paris and Daniela Pegna in Frankfurt; Editing by Victoria Bryan)

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