* Says dividend for 2010 to remain unchanged at 1.50 eur/shr
* 2011 div to be not below 1.30 eur/shr, 2012 div to be flat
* E.ON to expand into two new markets
* To grow in power production, energy trading outside Europe
* Shares rise 3.2 pct vs index up 0.6 pct
(Adds more analyst comments, details, Scottish & Southern)
By Peter Dinkloh
FRANKFURT, Nov 10 Germany's E.ON (EONGn.DE), the
world's largest utility, promised investors minimum dividends
for two years, seeking to restore confidence in an industry
unsettled by slumping prices and demand.
The triple whammy of lower industrial production, declining
power and gas prices as well as prospects of higher taxes in
markets such as Germany has made the utility sector .SX6P the
worst-performing in Europe for the second year in a row.
New Chief Executive Johannes Teyssen is seeking to mend ties
with investors and said on Wednesday the company's dividend for
2011 would drop no more than 13 percent to 1.30 euros a share,
and its 2012 payout would remain at that level.
"As prospects for E.ON's operating business are weak the
dividend was the last hope" for investors, said Equinet analyst
Investors seemed unconcerned that the dividend pledge means
E.ON might pay out more of its earnings than it had been
planning, and E.ON shares rose 3.16 percent to 22.88 euros at
1448 GMT, outperforming the STOXX Europe 600 utilities index
.SX6P, which was up 0.6 percent. [ID:nWEA8556]
"A stable dividend is something fantastic these days," said
Herbert Wertz, who helps manage 260 billion euros ($358.3
billion) for insurer Generali.
The news also lifted German peer RWE (RWEG.DE) 2 percent
while Britain's Scottish & Southern (SSE.L) advanced 3.3 percent
after singing from the same hymn sheeet by reiterating its plans
for its dividend payments in the years through 2013.
By announcing 15 billion euros in divestments through 2013
E.ON bolstered confidence in its ability to dole out the payout
as the picture for earnings in coming years remains bleak.
The company will see at least three years of falling
earnings, people with knowledge of the matter had told Reuters
on Tuesday. [ID:nLDE6A826D]
For a graph of industrial production and utility earnings
click on: r.reuters.com/xuw34q
For a column on E.ON's strategy from BREAKINGVIEWS click on
As power prices in Germany, Europe's largest power market
are close to six-year lows, and industrial production, a key
measure for energy demand, dropped to the levels of early 2004
in Europe, E.ON is seeking growth outside Europe.
Teyssen, at the helm since May, said he plans to increase
the company's reach to two new markets, although he has not yet
decided which ones.
"It might be Brazil, maybe China," Generali's Wertz said,
while a person familiar with E.ON's strategy told Reuters the
company is considering expanding into south-east Asia.
That strategy has already helped competitors such as GDF
Suez GSZ.PA and Enel (ENEI.MI), which recorded booming
earnings from businesses in Latin America. [ID:nLDE6A21QH]
As E.ON's record has been mixed when it comes to takeovers,
with billions of euros of writedowns on acquisitions in Spain,
Italy, France, the United States and Britain, it is now
concentrating on building fossil-fuel or renewable energy power
The "focus (is) on organic developments with (a) highly
disciplined investment approach" with the target to generate a
quarter of its earnings outside Europe, E.ON said on Wednesday.
That strategy "isn't going to prove easy," Kepler Equity
analyst Ingo Becker said. "The execution risk in both disposals
and acquisitions is high." The company right now earns less than
10 percent of its profits outside Europe, Becker said.
(Reporting by Tom Kaeckenhoff in Duesseldorf and Golnar
Motevalli in London; Editing by Jon Loades-Carter and Hans