* One-off items to hit less in 2012 than in 2011
* Sees 2011 adj EBITDA at 11.2-11.9 bln eur vs poll 11.7 bln
* Reiterates adj EBITDA to rise to 13 bln eur by 2013
* Shares down 1.8 percent
* To pay dividend of at least 1.3 euros/share for 2011
(Adds link to Reuters Insider interview with E.ON CEO)
By Peter Dinkloh
DUESSELDORF, Germany, March 9 German utility
E.ON (EONGn.DE) sees two tough years ahead as the cost of a tax
deal struck with the government on nuclear plants, higher gas
costs and lower power prices keep a lid on profits.
The world's largest utility by sales, which is just four
months into a major shake-up of its business aimed at cutting
its debts and expanding outside Europe, warned on Wednesday of
an expected fall in its core profit this year.
The same burdens would to a lesser degree drag on earnings
in 2012 before profits regain their 2010 levels in 2013,
recently appointed Chief Executive Johannes Teyssen said.
"The next two years will be economically tough for us,"
"The transformation process demands a lot of trust in E.ON
and its management from all our stakeholders."
The main drag on profit this year will be a deal struck in
2010 allowing operators to extend the operating life of German
nuclear power plants by 12 years in exchange for an extra tax
and a levy to boost investment in renewable energy.
For a Reuters Insider interview with Teyssen click on:
HOOKED ON GAS CONTRACTS
But gas holds the "biggest risk" for 2011, Finance Chief
Marcus Schenck said, as E.ON seeks to renegotiate long-term gas
contracts under which it is buying the fuel at higher prices
than the oversupplied market allows it to pass on.
The gas division's operating earnings might more than half
to 700 million euros in 2011, CEO Teyssen forecast, as the
company urgently negotiates with suppliers to change its gas
contracts, under which it has to buy a fixed amount at a price
tied to the oil price.
Disappointment at the results was reflected in the E.ON
share price. The stock was down 1.8 percent at 22.71 euros by
1510 GMT, while the STOXX Europe 600 utilities index .SX6P was
just 0.1 percent lower.
"Their gas business is hurting them again this year," said
MacQuarie analyst Matthias Heck. "It is therefore decisive they
renegotiate their gas purchasing contracts successfully and that
they get the disposals done now."
The group has been negotiating for new terms with little
apparent success for some two years and a person with knowledge
of the matter said some partners will simply not budge.
"Russia's Gazprom (GAZP.MM) has made an offer that is not
sufficient," said the person, who declined to be identified.
"Norway and the Netherlands are more willing to accommodate
E.ON's wishes," said the person.
DIVIDENDS TO REASSURE
To soothe investors during a time of shaky profits, E.ON is
promising investors a dividend of at least 1.30 euros a share
for 2011 and 2012. While down from the 1.50 euros a share for
2010, it is providing certainty that other large, listed
European utilities have not.
That promise comes as E.ON expects adjusted earnings before
interest, tax, depreciation and amortisation (EBITDA) to fall to
11.2-11.9 billion euros ($15.6-$16.5 billion) in 2011, against a
market forecast of 11.7 billion according to a Reuters poll.
By 2013 adjusted EBITDA will return to a level of at least
13 billion euros, E.ON said.
As falling earnings threaten to make the company more
indebted than management deems appropriate, Teyssen has
committed to selling assets worth 15 billion euros.
He has already sold units worth 9 billion euros in four
months - including E.ON's stake in Gazprom (GAZP.MM) and power
grids in Britain - which helped cut E.ON's debt to 37.7 billion
euros at the end of December.
That is 2.8 times EBITDA, less than E.ON's targeted multiple
of 3, giving it room for planned investments of 7.5 billion
euros in businesses outside Europe, CFO Schenck said.
(Additional reporting by Josie Cox and Maria Sheahan in
Frankfurt; Editing by Alexander Smith)