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E.ON with Robust First-half Results Despite COVID-19


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  • First-half results underpins the business model’s resilience: bulk of pandemic’s impact has no long-term implications
  • Medium-term forecast and dividend policy reaffirmed, full-year forecast revised
  • innogy takeover completed after squeeze-out, integration proceeding according to plan
  • Stimulus packages and Green Deal create additional growth opportunities for E.ON’s core businesses

Following the conclusion of the innogy takeover, European energy company E.ON has again demonstrated its resilience in the current economic crisis.


Assuming that there is not another far-reaching lockdown in E.ON’s core markets, the company expects that the bulk of COVID-19’s impact is already reflected in its half year numbers. About €150 million—or half of the €300 million in total adverse earnings from COVID-19 anticipated in 2020, are attributable to the company’s regulated network business. Due to regulatory mechanisms in the various markets, most of these effects can be recovered in the years 2022 to 2024.

The adverse earnings impact on E.ON’s customer business likewise totals about €150 million. This business so far has remained largely unaffected by major payment defaults; provisions for increased credit losses are responsible for only a small portion of the adverse impact. The majority of it resulted from the early and precautionary sell back of electricity that had originally been procured for customers but that could not be sold as a result of the lockdown. The sell back enabled E.ON to significantly reduce its risks early on.

COVID-19’s total unrecoverable adverse impact in 2020 is thus limited to only about 2 percent of EBITDA. Against this backdrop, E.ON reaffirmed its medium-term targets and its dividend policy. E.ON also revised its forecast for full-year 2020 to reflect COVID-19’s technical earnings effects which are now more apparent. Taking into account the effects of the COVID-19 pandemic that are already foreseeable today, E.ON expects the Group’s adjusted EBIT for the 2020 financial year to be between €3.6 and €3.8 billion and its adjusted net income to be between €1.5 and €1.7 billion. Previously E.ON had announced forecast ranges of €3.9 to €4.1 billion for adjusted EBIT and €1.7 to €1.9 billion for adjusted net income. At the end of the first quarter the company had unequivocally emphasized that these figures did not yet include effects involving the deferral of earnings in the network business due to regulatory mechanisms. From today’s perspective, these effects are now sufficiently quantifiable.

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E.ON unconditionally reaffirmed the earnings ambitions for 2022 communicated at the Capital Markets Day in the spring and merely made a technical adjustment to its growth rates by updating its forecast for 2020. E.ON also reaffirmed its announced intention of increasing its dividend payout by up to 5 percent annually through the dividend for the 2022 financial year.

As anticipated, the E.ON Group’s adjusted EBIT for the first six months of 2020 declined owing to the aforementioned effects to roughly €2.2 billion compared with €2.3 billion in the prior year. Adjusted net income decreased to €933 million from €1.05 billion in the prior year.

CEO Johannes Teyssen emphasized: “We can now see much more clearly than at the end of the first quarter and can look ahead to the second half of the current year with greater confidence. We delivered a strong first-half operating performance. Despite COVID-19, all our businesses are running smoothly and robustly. We were able to limit the pandemic’s repercussions, which so far have been mild. We were even able to make up for the adverse impact of weather factors in the first quarter. This enables us to fully reaffirm our medium-term targets as well as our dividend policy.”

innogy takeover concluded, integration on schedule

The squeeze-out of the remaining minority shareholders in early June enabled E.ON to take the final big step of the complete takeover of innogy. The sale of businesses in Hungary, the Czech Republic, and Germany, which was a condition imposed by the European Commission, is being implemented by E.ON as planned. It has already signed the necessary agreements with buyers. The disposals will yield proceeds of around €1 billion. “Despite a difficult market environment,” Johannes Teyssen said, “we were able to realize the full value of these attractive retail businesses. From an economic perspective, we’re therefore very satisfied with the sales.”

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In late July E.ON concluded a memorandum of understanding with the Slovakian government to acquire RWE’s 49-percent stake in VSEH’s business. The government is not exercising its right of first refusal on the change of ownership. Going forward, E.ON will serve 1.5 million customers in Slovakia and become the biggest network operator in a key Eastern European market.

From today’s perspective, E.ON also expects to deliver the planned synergies from the innogy transaction of roughly €740 million from 2022 onward and roughly €780 million in 2024. It plans for the integration to result in a total of up to 5,000 redundancies.

Strong operating performance

CFO Marc Spieker presented a robust first-half operating performance amid the global pandemic: “As anticipated, the COVID-19 crisis affected our EBIT in the second quarter. However, the decline relative to the first half of 2019, which resulted largely from the pandemic’s repercussions, was comparatively mild. Through operating measures, E.ON was able to fully offset the reduction in sales volume in warm winter months that had adversely affected earnings in the first quarter. The main effect is the technical deferral of earnings to subsequent years. From an operating perspective, our business model demonstrated its high degree of resilience and effectiveness.”

The Energy Networks segment is operating stably in all markets and recorded adjusted EBIT of roughly €1.7 billion, approximately €250 million less than the pro forma figure for 2019. About €100 million of this is attributable to a reduction in sales volume due to COVID-19. Lower earnings in Sweden resulting from the new regulatory period that began this year constituted another adverse factor.

Relative to the pro forma prior-year figure, the Customer Solutions segment’s adjusted EBIT rose by €14 million to €457 million. E.ON is pushing ahead the digitalization of services in its customer solutions business. More than 1 million customers in Germany are already served by a new digital platform as of today. That number will increase to 4 million by year-end and to all customers in Germany by 2024. The restructuring of E.ON’s business in the United Kingdom is also moving forward as planned. About 10,000 customers per day are being migrated to the new digital customer platform that E.ON developed with Kraken Technologies. The company expects the transformation in this market to be completed by mid-2022.

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Stimulus packages create growth opportunities for E.ON

The economic stimulus packages adopted by the European Union and the German federal government underpin E.ON’s strategic position by providing substantial additional investment opportunities in the company’s core business, particularly in networks, batteries, storage devices, and infrastructure. At the presentation of its numbers for the first quarter of 2020, E.ON had already announced €500 million in additional infrastructure investments for climate protection and economic stimulus. Its network investments in 2020 will be €200 million higher than originally planned.

E.ON will leverage the expertise of its regional companies to help implement Germany’s national hydrogen strategy. Hydrogen has the potential to play a key role in the complete decarbonization of industry, transport, and housing. E.ON will support the market ramp-up at all stages of the value chain—from production and storage to distribution and end-use by customers—to help decarbonize the various sectors until 2050. Today, the company already has 50 hydrogen projects in Europe. E.ON’s network companies are making their gas distribution networks H2-ready. By connecting their distribution networks to distributed power-to-gas production facilities and to the planned hydrogen transport network, they aim to mix natural gas with green gases. The chairperson of the National Hydrogen Council established this year by the German federal government is from E.ON.


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