German Utility E.ON Incurred Losses Doubled In 2015, Mulling For Focusing On Renewables

By Staff Writer

Mar 10, 2016 12:49 AM EST

E.ON SE, the Düsseldorf, Germany based electric utility service provider, has disclosed that its annual net loss has doubled in 2015 to €7billion (£5.4billion). Incurred loss of one of the world's largest investor-owned utility service providers has reached to that amount after writing down its value by €8.8 billion.  Meanwhile, profit from its UK business has appeared flat while supply business earnings falls 9% to £267million.  

The power provider has blamed the record low wholesale electricity prices as the other major cause behind further deterioration in its earning scenario. However, frustrating report from UK business appears due to 3.5% cut in gas prices since January 2015 and keen competition in the marketplace. The utility has again reduced its standard gas price in the UK by an average of 5.1% from February 1 following latest bout of tariff cuts in the industry, reports BBC.

Meanwhile, the spin-off of its oil and gas-fired power activities from its renewable energy division, completed in January, is expected to dishearten the outlook for 2016 too. E.ON and RWE, Germany's biggest energy firms, have been forced to write off billions in the value of their conventional energy assets. German government demands a shift to cleaner sources, a fair analysis from Sky News.

The utility's overall performances underline necessity of the group's radical plan to split the business in two in a bid to rescue its more profitable, low-carbon assets. Steady growth of the subsidized renewable energy sector across Europe has tolled heavily on E.ON's thermal power plants through driving down the market price of electricity. Reduced power tariff has left many of its coal- and gas-fired plants uneconomic and unused.

The group's 2015 earnings before interest, tax and other costs have fallen 10% year on year to €7.6 billion. However, the earnings may be witnessed slumping further to between €6 and €6.5 billion in 2016. The ever decreasing number of operating energy firms reflects the far-reaching structural transformation of the conventional industry, reports The Telegraph quoting Johannes Teyssen, the E.ON Chairman.

E.ON has planned to focus on renewables, networks and supply and spin-off majority of the generating assets to form a new company naming 'Uniper'. The proposed set up is expected to offer its shareholders more options while more leeway to E.ON and Uniper's management.

Renewable energy sector has witnessed a tremendous growth with government patronization across the world. Historic low oil prices have forced the energy firms to cut tariff rate which eventually brought huge losses for the conventional energy businesses. Furthermore, German government's opting for renewables has compelled E.ON and other energy giants to plan for transformation in the future.

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