A rise in renewable energy has rattled utilities across Europe and now Germany’s biggest utility, E.ON, has said it will shut more than a quarter of its power plants in Europe in response.
The company has also proposed nearly halving its dividend for 2013.
Reuters Newsagency reports 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 Dr Johannes Teyssen wrote in the group’s annual report just published.
“As a result, we’ve decided to decommission nearly 13 gigawatt of capacity,” Mr Teyssen said.
E.ON said it expected earnings before interest, tax, depreciation and amortisation (EBITDA) of €8.0-8.6 billion this year.
E.ON proposed a dividend of €0.60 a share for 2013, down from €1.10 paid a year earlier.
Analysts, on average, expected 2014 EBITDA of €8.4 billion and a dividend of €0.66 a share for 2013.
Reuters reports shares in the company were indicated 1.2 per cent higher in pre-market trade, as E.ON’s 2013 EBITDA of €9.315 billion, albeit 14 per cent lower that in 2012, beat analysts’ expectations.
Across Europe, utilities have been surprised by a surge in renewable energy sources.
Most notably that has come from 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 utility GDF Suez to book a €15-billion charge on its power assets, while German rival RWE earlier this month posted its first net loss since 1949.
Reuters reports E.ON, whose shares have tumbled 54 per cent over the past 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 net debt.
As well as being hurt by the rise in rival renewable energy, Germany’s utilities are grappling with the country’s decision to fully abandon nuclear power by 2022.
