E.On’s change in strategy is too little, too late

Self evident perhaps, particularly for CFCL
http://interfaxenergy.com/gasdaily/article/15527/eons-change-in-strategy-is-too-little-too-late

E.On’s change in strategy is too little, too late

By Annemarie Botzki
Posted 13 March 2015 12:20 GMT
E.On’s Datteln coal-fired power plant. The company is losing market share to renewables. (E.On)
The full implication of the changing energy market dynamics became clear when E.On – Germany’s biggest utility – posted a record loss of €3.2 billion ($3.38 billion) for 2014 this week.
Although the company said the loss was mainly a result of impairment charges on its generation business in the UK, Sweden and Italy, the company has been struggling with Germany’s nuclear phase-out, a large increase of renewable energy, a drop in power prices and the recent oil price crash.
E.On‘s EBITDA fell from €9.2 billion in 2013 to €8.3 billion in 2014 while underlying net income dropped by €0.5 billion to €1.6 billion. Gas sales were down by 5%, from 113.3 billion cubic metres in 2013 to 107.9 bcm in 2014.
“The earnings performance reflects the persistently difficult situation on energy markets in Germany and Europe,” E.On said.
Germany’s ‘Energiewende’ is pushing markets away from nuclear and coal to more decentralised renewable sources – which now account for 27.8% of Germany’s final electricity consumption, compared with 25.4% in 2013.
“For the first time, more electricity was generated from solar and wind energy, hydropower and from biomass than from lignite,” Rainer Baake, from Germany’s Federal Ministry for Economic Affairs and Energy, said last week.
The utility said it wants to complete the process of dividing its business into two companies in 2016. However, this is a late change of direction.
“E.On and others are looking for a new business model. Their credit rating is bad, their stocks are down and their power plants become less valuable in a market with growing renewable capacity and less power demand,“ Arne Jungjohann, a German energy analyst, told Interfax.
E.On announced in December that it plans to spin off its conventional generation, global energy trading, and exploration and production businesses into a new, independent company. E.On will focus entirely on renewables, distribution networks and customer solutions.
E.On asset breakdown

Upstream

• North Sea production: 17 MMboe/y
• North Sea reserves: 186 MMboe
• Russian production: 6.3 bcm/y
• Russian reserves: 152 bcm*

Global commodities

• Coal supply: 29 mtpa
• Long-term gas contracts: 35 bcm/y
• Gas storage: 9 bcm
• LNG regasification: 4.7 bcm/y

Power generation

• 51 GW of capacity**
• Germany: 17.5 GW
• UK: 6.6 GW
• Sweden: 6.3 GW
• Other Europe: 10.2 GW
• Russia: 9.9 GW

2013 figures, excluding Spain. *According to 2009 swap agreement. **E.On holds 83% of E.On Russia and 43% of Eneva. E.On Russia included at 100%, Eneva not included.
Once the new company has been set up in Germany’s Ruhr region, it will control 6.3 billion cubic metres per year of gas production in Russia and 152 bcm of reserves. A further 35 bcm of long-term contracts are also being transferred, along with 9 bcm of storage capacity and 4.7 bcm of LNG regasification volume.
As part of the restructuring, E.On sold its entire business in Spain and Portugal to Australian investment firm Macquarie in December for €2.5 billion.
“In addition, we’re evaluating the sale of our activities in Italy and will conduct a strategic review of our exploration and production business in the North Sea,” E.On said.
The company announced the sale of its gas and coal generation assets in Italy to Czech group Energetický a Prumyslový Holding in January.
Italian assets
The sale covers 4.5 GW of power generation assets, including 3.9 GW of gas-fired capacity across six separate facilities on both the Italian mainland and in Sicily. A coal-fired power plant in Sardinia is also included.
“After years of big profits, Germany’s ’big four‘ utilities are fighting for survival. They have underestimated the growth of renewables and fought them too long. They are now paying the price for sticking with an outdated business model,” Jungjohann said.
The decline in oil prices and weak ruble have also harmed the company’s business. “The developments in Russia give cause for concern,” the company said.
“All of this will make 2015 another challenging year. Our forecast is therefore cautious: we expect our EBITDA to be €7-7.6 billion,” it added."

IMHO The big 4 dinosaurs have crippled investment in new technology, and lack the insight to invest accordingly.

With further losses planned, chances of CFCL bailout by @E.OnEnergyUK ....??