15.03.2017
E.ON SE DE000ENAG999
DGAP-News: E.ON's new strategy fully reflected in its balance sheet
DGAP-News: E.ON SE / Key word(s): Final Results
E.ON's new strategy fully reflected in its balance sheet
15.03.2017 / 07:30
The issuer is solely responsible for the content of this announcement.
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E.ON's new strategy fully reflected in its balance sheet
Company sets off into new energy world with healthy operating business
- Adjusted EBIT of EUR3.1 billion and adjusted net income of EUR904 million
at upper end of guidance range
- Being freed from past burdens leads to net loss of roughly EUR16 billion
but also lays foundation for future growth
- Additional contract with German federal government for funding
nuclear-energy phase-out ready for signing
- Management proposes dividend of 21 cents per share for 2016 financial year
- Fixed dividend of 30 cents per share planned for 2017, payout ratio to
increase subsequently to 50-60 percent, providing dividend growth in
subsequent years
- 2017 adjusted EBIT expected to be between EUR2.8 and EUR3.1 billion, 2017
adjusted net income between EUR1.2 and EUR1.45 billion
- Plan to reduce economic net debt from EUR26.3 to about EUR20 billion over
medium term
- More customer-centric setup and moderate workforce reduction of 3 percent
to deliver permanent costs savings of EUR400 million annually by 2018
Overview
E.ON has now fully accounted for the impact of its new strategy. Its balance
sheet for the 2016 financial year will be the last to reflect the burdens of
the past. This clean break clears the way for the company's healthy core
operating businesses-energy networks, customer solutions, and renewables-to
grow in the future.
The main items were the successful Uniper spinoff and the agreement with the
German federal government on funding the phase-out of nuclear energy. Both
items left deep marks on the company's balance sheet but also paved E.ON's
way into the new energy world.
"2016 was a transitional year. The impact on our balance sheet marks a
turning point and clears E.ON's way into the new energy world. It enables us
to focus all our energy on our three core businesses: energy networks,
customer solutions, and renewables," said E.ON CEO Johannes Teyssen,
summarizing the year's significance.
All the members of the E.ON SE Management Board were on hand in Essen to
present the company's 2016 results, its outlook for 2017, and the latest
development in its core businesses (energy networks, customer solutions, and
renewables).
Healthy core operating business
E.ON's core operating business was characteristically robust in 2016.
Adjusted EBIT for the E.ON Group of EUR3.1 billion was at the upper end of
the guidance range (EUR2.7 to EUR3.1 billion) and below the prior-year
figure. Adjusted net income of EUR904 million was likewise at the upper end
of the guidance range (EUR0.6 to EUR1 billion) and below the prior-year
figure. Factoring out prior-year earnings from businesses that have been
sold, adjusted net income rose by about 10 percent. E.ON's core businesses
recorded adjusted EBIT of EUR2.5 billion, slightly less than the prior-year
figure which had benefited from positive one-off items. E.ON generated about
65 percent of its earnings in regulated or long-term contractual businesses.
Aiming for dividend growth
The Management Board will propose to the Annual Shareholders Meeting that
the company pay out a dividend of 21 cents per share for the 2016 financial
year. This would be in the middle of the announced range of 40 to 60 percent
of adjusted net income. E.ON intends to increase the dividend by about 45
percent and pay out a fixed dividend of 30 cents per share for 2017. The
company aims to increase its payout range to 50 to 60 percent of adjusted
net income, providing dividend growth for years after 2017. "The upward
adjustment of our dividend policy for the subsequent years demonstrates that
we'll continue to keep our shareholders' interests firmly in view in the
future as well," future CFO Marc Spieker said.
Business segments deliver solid performance
Energy Network's adjusted EBIT declined primarily because of the
non-recurrence of positive one-off items recorded in Germany in 2015. By
contrast, its earnings in Sweden and East-Central Europe/Turkey were higher.
Customers Solutions' adjusted EBIT was at the prior-year level. The earnings
decline in Germany is principally attributable to the non-recurrence of
positive one-off items recorded in 2015. Earnings in Germany were also
adversely affected by higher customer-acquisition costs, higher Renewable
Energy Law levies, higher network fees, and costs for the further buildup of
the customer-solutions business. Adjusted EBIT in the United Kingdom was
higher despite a weaker British Pound in the wake of the Brexit vote. This
positive performance is primarily attributable to lower costs in conjunction
with government-mandated energy-efficiency measures.
The Renewables segment posted higher earnings, mainly because Amrumbank West
and Humber Gateway offshore wind farms were, for the first time, in
operation for the entire year.
Core business freed of past burdens and risks
The successful Uniper spinoff necessitated impairment charges totaling about
EUR11 billion. In view of Uniper stock's positive performance since its
listing, the disposal proceeds from the planned future sale of E.ON's
remaining Uniper stock could have a positive impact.
In addition, accounting standards required E.ON to record about EUR3.6
billion in earlier currency losses at Uniper businesses as a loss on its own
income sheet when it deconsolidated Uniper.
E.ON will also make a one-time payment of around EUR2 billion for the
agreement with the German federal government on the funding of the country's
phase-out of nuclear energy. Germany's two houses of parliament passed the
relevant law at the end of last year. The accompanying agreement with the
German federal government is ready for signing. The German federal
government will assume responsibility for the intermediate and final storage
of nuclear waste, relieving the company and its shareholders of this
perpetual risk. In return, E.ON will pay about EUR10 billion into a
state-run nuclear energy fund in mid-2017. This payment will be funded
primarily with available liquid funds and securities. As already
communicated, E.ON has a comprehensive financing plan in place for any
additional liquidity needs.
Teyssen: "The law and agreement represent an expensive and painful solution,
but one that also provides clarity for the future and relieves us of
perpetual risks. In our view, the solution is therefore acceptable.
Ultimately, it's in the interest of the company and its shareholders for the
responsibility for intermediate and final storage to be definitively
clarified and for it to be no longer borne by the companies operating
nuclear power stations."
Altogether, these one-off items resulted in a net loss of about EUR16
billion for 2016. In return, however, the company is completely relieved of
past burdens. With the exception of the nuclear risk surcharge, none of the
loss is cash-effective.
Transfer of Uniper stock reduces equity
The impact of the Uniper spinoff, adjustments to the provisions for nuclear
asset-retirement obligations, and the increase in pension obligations due to
the current low-interest environment caused E.ON's equity to decline
significantly to EUR1.3 billion at year-end 2016.
The spinoff involved E.ON transferring a majority of Uniper stock to its
shareholders. This reduced the company's equity by about EUR3.7 billion. The
equity shown on E.ON's balance sheet does not sufficiently reflect its
earnings strength and thus its true value. The capital market, which bases
its calculations on the earnings strength of a company's businesses, values
E.ON at close to EUR14 billion.
Package of measures to reduce debt
E.ON's economic net debt of EUR26.3 billion at year-end 2016 was above the
pro forma figure of EUR21.3 billion for year-end 2015, which was adjusted to
exclude the Uniper stake. The increase is primarily attributable to the
transfer of responsibility for nuclear-waste storage to the German federal
government, the significant increase in the remaining provisions for nuclear
asset-retirement obligations, and the low interest-rate environment and the
resulting increase in pension obligations at the balance-sheet date required
by IFRS.
E.ON has put together a package of measures to reduce its debt by about EUR7
billion to about EUR20 billion and increase its equity over the medium term.
As announced, E.ON wants to fund the nuclear risk surcharge of roughly EUR2
billion with capital measures. Possible options are a capital increase of up
to 10 percent (ABB) and the issuance of hybrid bonds. Other measures such as
the sale of Uniper stock, the transfer of the company's stake in the Nord
Stream 1 pipeline into a pension fund, the optimization of nuclear
decommissioning costs, the sale of non-strategic businesses, and a scrip
dividend have the potential to reduce E.ON's debt by EUR5 billion. In
addition to these measures, E.ON will focus resolutely on operating
efficiency and disciplined capital allocation. Consequently, E.ON has
reduced its investment budget for the current three-year period by EUR2
billion, or 20 percent, to EUR8 billion.
Phoenix program to deliver customer-centric setup and EUR400 million in cost
savings; moderate, socially responsible workforce reduction
The Uniper spinoff places E.ON's entire strategic focus on the future
businesses of the new energy world. A program called Phoenix will now make
the company's setup and processes more customer-centric, thereby tailoring
them to the requirements of the new energy world. E.ON will delegate more
decision-making authority to frontline functions and integrate support
functions like IT and procurement more closely into its operating business.
By 2018, Phoenix will permanently reduce E.ON's annual costs by EUR400
million. Restructuring will eliminate a range of tasks, resulting in up to
1,300 redundancies across the company, of which about 1,000 will be in
Germany. This amounts to around 3 percent of E.ON's current workforce of
43,000 employees.
E.ON aims to work with employee representatives to find mutually acceptable
solutions for employees affected by redundancy. The mechanisms include early
retirement, fair severance compensation, and secondment to a qualification
and transfer company for up to four years. "The moderate workforce
reductions that have now become necessary will play a key role in making
jobs at E.ON secure for the future," Teyssen said. "We need to change E.ON
in fundamental ways, but we'll do so with the greatest possible respect for
our employees. This part of our corporate culture has not changed. We have
not lost our social conscience."
2017 outlook
E.ON expects its 2017 Group adjusted EBIT to be between EUR2.8 and EUR3.1
billion and its 2017 adjusted net income to be between EUR1.2 and EUR1.45
billion. In addition, the company expects to achieve a cash-conversion rate
of at least 80 percent and ROCE of 8 to 10 percent.
This press release may contain forward-looking statements based on current
assumptions and forecasts made by E.ON Group Management and other
information currently available to E.ON. Various known and unknown risks,
uncertainties and other factors could lead to material differences between
the actual future results, financial situation, development, or performance
of the company and the estimates given here. E.ON SE does not intend, and
does not assume any liability whatsoever, to update these forward-looking
statements or to conform them to future events or developments.
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15.03.2017 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Language: English
Company: E.ON SE
Brüsseler Platz 1
45131 Essen
Germany
Phone: +49 (0)201-184 00
E-mail: [email protected]
Internet: www.eon.com
ISIN: DE000ENAG999
WKN: ENAG99
Indices: DAX, EURO STOXX 50
Listed: Regulated Market in Berlin, Dusseldorf, Frankfurt (Prime
Standard), Hamburg, Hanover, Munich, Stuttgart; Regulated
Unofficial Market in Tradegate Exchange; Mailand
End of News DGAP News Service
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