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German utility E.ON lowers 2013 outlook

Tuesday - 11/13/2012, 11:17am  ET

FILE - In this Aug. 3, 2011 file photo workers clean the company's logo at a building of E.On in Datteln, western Germany. German electricity and gas supplier E.ON AG on Tuesday Nov. 13, 2012 lowered its earnings forecast for next year because of economic uncertainties and changes in the energy industry, an announcement that caused its shares to tumble. The reduced forecast came as the utility, which is based in Duesseldorf, reported a euro 179 million ($228 million) loss for the third quarter. (AP Photo/dapd/Volker Hartmann, File)

GEIR MOULSON
Associated Press

BERLIN (AP) -- German electricity and gas supplier E.ON AG on Tuesday lowered its earnings forecast for next year because of economic uncertainty and rapid changes in the energy industry, an announcement that caused its shares to tumble.

The reduced forecast came as the utility, which is based in Duesseldorf, reported a EUR179 million ($228 million) loss for the third quarter.

E.ON said the earnings figure was hit by charges totaling EUR1.2 billion at various units, and pointed to "a generally deteriorated business environment along with regulatory intervention."

A year earlier, E.ON made a net profit of EUR173 million. Third-quarter revenues rose to EUR28.23 billion from EUR24.46 billion.

E.ON's shares dropped sharply when markets opened and kept on falling. By late afternoon, they were down 12.8 percent at EUR14.42, by far the worst performer on Frankfurt's DAX index of blue-chip stocks.

The company said it remains on track to meet its target for this year of underlying net income between EUR4.1 billion and EUR4.5 billion, and still plans to pay a dividend of EUR1.10 per share for 2012.

However, it said it is reviewing its longer-term targets. The previous 2013 forecast for underlying net income of EUR3.2 billion-EUR3.7 billion "no longer seems achievable" in light of the "the substantial economic uncertainties and the structural changes in the energy industry," it said. The company also said it would review longer-term statements regarding its performance in 2015.

CEO Johannes Teyssen said E.ON faces "huge challenges," particularly in its electricity generation business, and added that the company is "exploring whether to close some assets."

He said in a letter to shareholders that one problem is that, as countries switch to more climate-friendly power supplies, gas-fired generators "have become barely profitable to operate." That's in part because overall electricity demand is very low, but also because energy from renewable sources is fed into grids as a priority when demand is higher, he added.

For the first nine months of the year, E.ON said its net earnings rose to EUR2.73 billion from the previous year's EUR864 million. Revenue increased to EUR93.63 billion from EUR77.51 billion.

For that period, E.ON credited an improvement in its wholesale gas business; the effect last year of costs stemming from Germany's decision to speed up its phaseout of nuclear energy; and new gas-fired generating units in Russia.

E.ON last year announced a plan to cut up to 11,000 jobs from a workforce of some 80,000.


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