Eon split nears completion as it posts record loss

German energy giant Eon has posted a record net loss of nearly €7 billion, as its separation into two companies – Eon and Uniper – nears completion.

The loss was the result of an €8.8 billion write-down on its generation assets, the firm said, resulting in a 10 per cent year-on-year decline in operating profit to €7.6 billion, in line with the company’s expectations.

Operating profit at Eon UK remained steady at €384m as a weak pound and lower costs in conjunction with government-mandated energy-efficiency measures were offset by narrower margins, lower sales volume, and keen competition in the marketplace.

Eon predicts that operating profit at a group level in 2016 will fall further still to between €6 and €6.5 billion, as the first months of the year have seen new lows in energy prices, further declines in gas prices, and a persistently weak Russian ruble.

Rival German energy firm RWE fared equally badly, yesterday posting losses of £154 million across Npower and its UK generation arm, and announcing a major restructure of its UK business.

European utilities have come under persistent pressure over recent years as the deployment of subsidised renewable technologies undermines the profitability of conventional thermal generation.

Eon chief executive Johannes Teyssen said: “Our numbers reflect the far-reaching structural transformation that our industry is experiencing and that continues unabated in the current year. Our strategy of having Eon and Uniper focus on their respective energy world is the right response to this transformation. But the course ahead will be tougher and longer than anticipated.”

Eon announced at the end of 2014 that it would create a new company in order to split its business operations between new emerging energy market trends, and the continued need for conventional security of supply.

The new Eon and its roughly 43,000 employees will focus on the new energy world. In view of the policy debate in Germany regarding nuclear energy, Eon wll also retain responsibility for its nuclear power stations in Germany and not to transfer them to the new company.

Uniper has slightly fewer than 14,000 employees and will focus on the conventional energy world – consisting of upstream and midstream businesses that originally belonged to Eon. Plans call for a majority stake in Uniper to be spun off to Eon SE shareholders in 2016, and Eon will initially retain a minority stake in Uniper.

The separation of Eon’s business operations was finalised in January this year. Uniper launched on schedule and Eon is currently preparing a spinoff report.