Eon warns of further plant closures as first-half profits fall 42%

Johannes Teyssen, chief executive, told shareholders: “Much will depend on future policy decisions which largely can’t be foreseen. A sober view of the situation indicates that, at least for 2013 and 2014, no recovery is in sight.”Weak demand linked to recession in Europe has caused wholesale power prices to fall. Meanwhile, the prioritisation of solar and wind energy in the grid has lessened demand for coal and gas power generation outside peak load periods, meaning some plants must operate at a loss, or face closure.Eon’s gas-storage business is also losing income because there is less need for large quantities of gas to be withdrawn from storage facilities. The share prices of Eon and its domestic rival RWE have fallen to their lowest in a decade.“These adverse factors will continue and, according to our analysis, may actually get worse,” Mr Teyssen said.“That’s why I announced at the start of the year that we’re responding?by cutting costs and enhancing efficiency?Increasingly, however, we also must consider closing and mothballing some assets.”

Eon last month announced it would mothball a gas-fired power plant in Mal?enice, Slovakia, which entered service two years ago, as it cannot operate profitably in the current environment.“Unless the business environment of the energy industry in our core European markets changes tangibly, other plant closures will be unavoidable,” Mr Teyssen said.Eon’s underlying net income fell 42 per cent to €1.9bn in the first half, compared with the same period a year ago, exceeding analysts’ expectations of roughly €1.8bn in underlying net income. Total sales declined 1 per cent to €64.6bn during the first six months of the year.Eon is attempting to offset its domestic fossil power problems by expanding outside traditional European markets, into countries such as Turkey. It is also investing heavily in renewables.Eon said it was making progress with its divestment programme and now aimed for €20bn in proceeds, against an original target of €15bn.Eon said it continued to expect full-year underlying net income of between €2.2bn and €2.6bn.


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