German utilities earnings to take a hit: Citi analysts

German energy giants RWE and E.ON are expected to report earnings losses of between 15% to 16% year-on-year following low temperature-led demand over the winter, analyst notes from Citi Equities Research said.

E.ON and RWE are scheduled to release their first quarter financial results on Tuesday and Wednesday respectively, with earnings for both expected to follow the weaker trend established last week by the UK’s Drax and Centrica reports.

“As with the rest of the utilities reporting season this quarter, the effect of the warm winter is likely to be felt negatively in the results,” Citi said of RWE’s results.

The bank forecasts a 15.9% year-on-year decline in operating income for npower’s parent company.

The analysts also forecast negative effects on the earnings of E.ON due to milder than average winter temperatures, which suppressed demand levels and weighed on wholesale market prices.

The analysts forecast a decline in earnings before interest, taxes, depreciation, and amortization of 15% on the year.

Financial results last week from British Gas owner Centrica and generator Drax also pointed to the mild winter and bearish gas market as key downward drivers over the last quarter.

Low weather-related demand due the abnormally mild winter has left gas storage levels at record highs for this time of year, weighing on the price generators can charge on the wholesale gas energy markets.

In addition, milder than average weather conditions across Europe in large part prompted gas and power sales for French state-owned EDF to slump 4.2% in Q1 2014 compared to the same time last year, the company said last week.

Financial reports from gas producer Gazprom are expected towards the end of the week, while SSE’s preliminary financial results are scheduled for Wednesday May 21.