UK supply profits up amid tough times for Eon group

Eon’s UK supply profits provided a ray of sunshine in an otherwise gloomy picture for the German utility group as it announced 2013 financial results on Wednesday.

Earnings before interest, taxation, depreciation and amortisation (Ebitda) rose 26 per cent to £296 million at the UK retail arm, attributed to cost cutting and a cold start to the year driving up consumption. The retailer raised prices by 3.7 per cent in December.

Tony Cocker, chief executive of Eon UK, emphasised that service levels had also improved. He reiterated calls for a full Competition Commission investigation to look into the “questions that still hang over the sector”.

Meanwhile, UK generation and upstream profits slumped by a third to £388 million, on the closure of Kingsnorth coal power station and a “barely profitable” gas generation fleet.

Across the group, Ebitda fell 14 per cent to €9.3 billion (£7.8 billion), hit by a tough market for conventional power generation. This was at the lower end of market expectations.

As a glut of renewables in Europe continues to erode the profitability of conventional power stations, Eon has decided to shut down nearly 13GW of capacity, more than a quarter of its fleet.

The group sold off more than €20 billion (£17 billion) worth of assets last year, exceeding a target of €15 billion, in efforts to strengthen the balance sheet. It also cut some 7,700 jobs.

The company forecasts Ebitda for 2014 to be lower again, at €8 to €8.6 billion (£6.7 to £7.2 billion), following the sale of income-generating assets.

“Taking a sober view of what lies ahead, there are few indications that our market environment will rapidly or tangibly improve,” group chief executive Johannes Teyssen wrote in the Annual Report.

There will be “limited funds” for investments, the group said. These will be targeted at the growing renewables and distributed energy businesses, as well as necessary network and maintenance work.