November 13, 2012 / 8:26 AM / in 5 years

UPDATE 3-E.ON warns of weaker power demand in Europe

* Company slashed 2013 outlook late on Monday

* Looking into possible closure of plants-CEO

* E.ON 9-month EBITDA 8.8 bln eur vs 8.5 bln in Rtrs poll

* Shares fall almost 12 pct, biggest intraday decline (Adds fresh CEO quotes, analyst comment, details on plants)

By Christoph Steitz and Vera Eckert

FRANKFURT, Nov 13 (Reuters) - Germany’s No.1 utility E.ON warned of weakening power demand in Europe and signalled it may close plants and step up saving efforts after cutting its outlook for next year.

Lower demand for electricity on the back of Europe’s economic crisis has reduced revenue and capacity utilisation at German energy plants and has curbed companies’ trading activity.

“At no time since World War Two have power sales dropped so far in so short a span of time,” Chief Executive Johannes Teyssen said on Tuesday.

Shares in E.ON plunged as much as 11.8 percent, their biggest intraday decline in history which wiped out about 3.7 billion euros ($4.70 billion) of the group’s market capitalisation.

In a surprise statement late on Monday, E.ON warned it could miss its outlook for 2013, citing weak economic conditions that have hurt the energy industry.

According to the International Energy Agency (IEA), total primary energy demand in the EU is expected to decline by 2 percent in the 2010-2015 period, compared with a 10 percent rise globally over the same period.

E.ON’s European units are a key market for E.ON and, including Russia, accounted for about 46 percent of earnings before interest, tax, depreciation and amortisation (EBITDA) in the first nine months of 2012.


German energy groups are also grappling with the nuclear phase-out directed by Chancellor Angela Merkel last year following Japan’s nuclear disaster in Fukushima.

“Given our cautious view on the Central European power market, rising regulatory risk and balance sheet outlook, we continue to view E.ON as one of our least preferred utilities,” Citi analyst Sofia Savvantidou said.

Teyssen talked of immense pressure from the dismal conditions in power generation.

“We will therefore continue to optimise our conventional power plant portfolio and are looking into the possible closure of sites,” he said.

E.ON has said it will not build new coal or gas fired capacity in western Europe until 2020, except for existing projects including the delayed Datteln 4 coal block costing 1.3 billion euros.

Teyssen also said the group was shelving plans for a new coal-to-power generation unit of 1,100 megawatts (MW) at its Staudinger 6 generation plant at near Frankfurt.

E.ON’s nine-month EBITDA rose 35 percent to 8.8 billion euros ($11.2 billion), exceeding the 8.47 billion average forecast in a Reuters poll. Its underlying net profit for the period reached 4.04 billion euros, beating the average forecast of 3.79 billion. ($1 = 0.7867 euros) (Additional reporting by Tom Kaeckenhoff in Duesseldorf and Hakan Ersen in Frankfurt; Editing by Maria Sheahan and David Cowell)

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