* Brazil offsets European market for Gas Natural, Iberdrola
* Gas Natural, Iberdrola Q1 opg profits better than expected
* Vattenfall adj. operating profit drops by a quarter
* E.ON says German nuclear regulation might hit 2011 profits
(Adds Vattenfall, E.ON)
By Jonathan Gleave and Peter Dinkloh
MADRID/FRANKFURT, May 5 Soaring growth in Brazil
and regulated grid activities helped European utilities offset
weak power prices on the continent in the first quarter, while
companies without overseas businesses suffered.
Spanish utility Iberdrola (IBE.MC), whose international
activities make up 60 percent of its business, reported 4
percent growth in its first-quarter operating profit, while
domestic peer Gas Natural (GAS.MC), with about 30 percent of its
business in Latin America, reported flat operating profit.
Both companies' earnings were better than expected.
Swedish state-owned power provider Vattenfall [VATN.UL],
however, which has no business outside Europe and sold its
regulated high-voltage power grid in Germany last year, saw its
adjusted operating profit drop by more than a quarter.
"Brazil and regulated activities like network building have
compensated for the volatility in the de-regulated markets,"
Iberdrola Finance Director Jose Sainz Armada said on a
conference call after the group's first-quarter results.
The International Monetary Fund forecasts Brazil's economy,
Latin-America's largest, will grow 4.5 percent this year, and
Europe's 1.6 percent. Power prices on the continent are still a
quarter below their all-time highs of almost 85 euros a megawatt
hour in 2008.
Political difficulties are also causing problems for E.ON
(EONGn.DE), the world's largest utility by sales, which warned
shareholders it might have to alter its outlook for 2011 if the
government decides it must permanently close its nuclear plants
Isar I and Unterweser.
The government had forced the four operators of nuclear
power plants to shut the seven oldest plants after the nuclear
accident at the Japanese plant in Fukushima following the
earthquake in March.
E.ON has previously forecast adjusted 2011 earnings before
interest, taxes, depreciation and amortisation of between 11.2
billion euros and 11.9 billion euros and adjusted net income of
3.3 billion euros to 4 billion euros.
E.ON Chief Executive Johannes Teyssen said last year that he
planned to expand into new overseas markets to seek higher
Iberdrola and Gas Natural beat first-quarter earnings
estimates as their regulated businesses at home and abroad
offset poor European power demand, held back by sluggish Spanish
and British economies.
Both groups' Spanish-regulated power distribution businesses
enjoyed a boost in income due to changes in regulation that
The Spanish utilities have both seen their sizeable debt
burdens reduced not only by asset sales but also by the sale of
about 6 billion euros owed to the utilities in the form of
tariff bonds, designed to compensate companies for the shortfall
in regulated electricity tariffs.
Iberdrola said that a further 2 billion euros of tariff
bonds are expected to be sold next week [ID:nWEA8890].
(Editing by Sophie Walker and Will Waterman)