E.ON will focus on renewables, distribution networks, and customer solutions
and combine its conventional generation, global energy trading, and exploration
and production businesses in a new, independent company (“New Company”), a
majority of which will be spun off to E.ON SE shareholders. This new
organizational setup is the logical consequence of the new strategy that
the E.ON SE Supervisory Board decided on at its meeting today.
E.ON Supervisory Board Chairman Werner Wenning said about the decision: “I’m
pleased that the Supervisory Board unanimously approved the Board of
Management’s proposed new strategy, which will give our employees and our
investors clear prospects in two strong companies that are viable for the
future.”
“We are convinced that it’s necessary to respond to dramatically altered
global energy markets, technical innovation, and more diverse customer
expectations with a bold new beginning. E.ON’s existing broad business
model can no longer properly address these new challenges. Therefore, we want
to set up our business significantly different. E.ON will tap the growth
potential created by the transformation of the energy world. Alongside it we’re
going to create a solid, independent company that will safeguard security of
supply for the transformation. These two missions are so fundamentally
different that two separate, distinctly focused companies offer the best
prospects for the future,” E.ON SE CEO Johannes Teyssen said.
In 2015 E.ON will take necessary preparatory steps for the New
Company’s public listing. Both E.ON and the New Company will be solidly
financed, be positioned to secure jobs, and have prospects for creating new
jobs in the future. “We firmly believe that creating two independent companies,
each with a distinct profile and mission, is the best way to secure our
employees’ jobs. Our new strategy therefore isn’t a job-cutting program,”
Teyssen said.
E.ON: customer-oriented, sustainable, innovative
E.ON SE will focus on the new energy world and customer businesses. It will
have three core businesses: renewables, distribution networks, and customer
solutions. These businesses fit together and reinforce each other, creating a
business portfolio with stable earnings and strong growth potential. About
40,000 employees will be assigned to the distinctly focused company,
which, by concentrating on customers’ future needs, will ensure that employees
have good development opportunities in a multinational energy corporation.
In its new setup E.ON will provide innovative solutions to meet the
needs of its roughly 33 million customers. It will take new approaches to
further developing each of its three core businesses. For this
purpose E.ON will increase its investments already for the next year by
about €0.5 billion compared to the previously planned 2015 capex of
€4.3 billion. E.ON will place a particular emphasis on expanding its
wind business in Europe and in other selected target markets. It will also
strengthen its solar business. It will upgrade its energy distribution networks
in its European markets and also in Turkey and make them smarter so that
customers can take advantage of new products and services in areas like energy
efficiency and distributed generation.
Thanks to numerous initiatives and competitive products and
services, E.ON has substantially enhanced customer satisfaction in its
core markets. The current year is the first in some time in which E.ON has
enlarged its customer base in Germany. Through co-investments, E.ON
already partners with European and American start-ups that are developing
promising energy solutions that incorporate technologies of the future. In
addition, the company’s “:agile” program supports innovative business ideas
developed by employees and others and helps the entrepreneurs realize their
vision. E.ON will position itself as a pioneer in innovative,
customer-oriented solutions. It will identify trends and technical advances
early and draw on them to develop solutions for customers. “These efforts will
be guided by one objective: we want to be best in class in customer
satisfaction in all our target markets,” Teyssen said.
New impetus for the conventional energy world
“The transformation of the energy system will continue to require reliable
backup capacity well into the future as well as access to global markets for
energy products. With a portfolio consisting of conventional power generation,
global energy trading, and exploration and production, the New Company will
focus precisely on meeting these needs,” Teyssen said. He added that the New
Company’s clear focus will put it in an excellent position to lead the
necessary consolidation of power generation in Europe and to offer attractive
services for the system needs of the future.
Over the past decade E.ON has established leading positions in
conventional power generation in Europe and Russia. In recent years E.ON
has systematically optimized its generation fleet and production costs, laying
the foundation for sustainable profitability. A strong natural gas
portfolio—which encompasses exploration and production, gas transport pipelines
to Europe, long-term gas procurement contracts, and substantial storage
capacity in Germany—makes E.ON one of the leading players in the natural
gas business of the future. These power and gas activities will continue to
have E.ON’s well-established trading unit as their interface with global
commodity markets and European trading platforms. The New Company, which will
have its headquarters in Germany’s Rhine-Ruhr region and offer good prospects
to about 20,000 employees, will create a better platform for securing jobs
in an altered market environment.
Partner for regulators and policymakers
E.ON’s strategic transformation represents an important and attractive
opportunity for regulators and policymakers as well.E.ON is clearly separating
power and gas production and trading from its end-customer businesses, thereby
making both even more transparent for regulators. The new setup will
enable E.ON to accelerate the deployment of new technologies and at the
same time make a significant contribution to supply security. Both parts of
today’s E.ON will be developed in ways that ensure their future
viability.
New setup will secure jobs
In keeping with E.ON’s long tradition of social partnership, management
will work closely with employee representatives to work out the details of the
new setup and to implement it. Under the new setup, E.ON’s current
businesses will be continued in two companies that are viable for the future,
thereby improving the conditions for securing jobs. The spinoff will not be
accompanied by a job-cutting program. E.ON’s proven tradition of
codetermination will continue, including for employees outside Germany.
New setup built on robust financial foundation, ensuring stability
and value
The first step of the spinoff will involve E.ON transferring a majority
of New Company’s capital stock to its shareholders, with the result that New
Company will be deconsolidated. E.ON intends—over the medium term and in a
way that puts minimum pressure on the stock price—to sell the shares of its
remaining minority. This will enhance E.ON’s financial flexibility for
future growth investments.
E.ON’s financial flexibility is further enhanced by the divestment of its
entire businesses in Spain and Portugal, which it has agreed to sell to
Macquarie, an Australian investment firm, for an enterprise value of
€2.5 billion. The new owner will operate and further develop E.ON’s
conventional and renewable operations in both countries and be the future
partner for its distribution and retail customers there. “We are pleased that
in Macquarie we have found a good employer for our people. Macquarie has
already proven its trustworthiness in the acquisition of our gas transmission
business in Germany,” Teyssen said. In addition, prior to implementing the new
setup, E.ON is exploring the disposal of its activities in Italy and will
conduct a strategic review of its exploration and production business in the
North Sea.
All of the current Group’s bonds will remain at E.ON, giving the
Group’s lenders a proven, strong, growth-oriented counterparty.
The New Company will be set up with a strong net financial position,
ensuring that it can obtain a solid investment-grade rating.
Existing provisions for the dismantling and disposal of nuclear and
conventional assets will be fully covered in New Company’s balance sheet.
Because it will not have any of the Group’s existing capital-market liabilities
and thanks to its solid financing, the publicly listed New Company will be
financially robust.
Shareholders to receive attractive investments in distinctly focused
companies
E.ON and New Company’s respective business portfolios will differ
considerably in terms of growth, risk, innovation tempo, and cash flow profile.
Each company will face different strategic challenges and will therefore have
different requirements for capital. The new setup will create another
attractive stock. The two publicly listed companies will appeal to different
investor groups. E.ON SE will offer its investors attractive earnings with
low volatility and clear growth opportunities. New Company’s investors will
benefit from the cash flow from its current business portfolio in Europe and
Russia and from additional opportunities created by the anticipated
restructuring of generation markets in Europe. E.ON is therefore convinced
that the new setup will offerE.ON’s current shareholders additional value
potential.
New setup to be implemented by 2016
The New Company’s business units do not yet constitute a corporation. In
2014 and 2015 E.ON will therefore take the necessary legal steps to
combine these units. To ensure reporting continuity, E.ON’s current
reporting units will, for the time being, remain unchanged.
The implementation of the new setup will be accompanied by certain costs and
taxes, the details of which cannot be clarified until preparatory work is
conducted in the year ahead. E.ON does not anticipate a lasting increase
to its cost base, since new costs will be offset by the reduced requirements of
the two companies’ simpler organizational setup.
E.ON expects to carry out the spinoff after approval by the E.ON
Shareholders Meeting in 2016.
Altered market environment necessitates in impairment
charges
As part of the process of preparing the annual financial statements and the
new medium-term plan, the E.ON Board of Management recently tested the
Group’s assets for impairment. Beyond the roughly €700 million in
impairment charges already disclosed in the first three quarters, E.ON
expects to record additional impairment charges of about €4.5 billion in
2014, primarily on its operations in Southern Europe and on generation assets.
Although not cash-effective, the impairment charges will result in E.ON
reporting substantial negative net income. However, E.ON expressly
reaffirmed its forecast for full-year 2014 EBITDA and underlying net
income.
Dividend proposal for the 2014 and 2015 financial years creates
transparency for investors
In view of these strategic developments, the company’s restructuring, and
the related foreseeable uncertainties, the Supervisory Board agreed to
the E.ON Board of Management’s proposal that the company should pay a
fixed dividend of €0.50 per share for both the 2014 and 2015 financial years.
The dividend proposal applies regardless of issues such as the possible
consequences of portfolio streamlining, the accounting treatment of the new
setup, and the outcome of the pending court cases regarding Germany’s
nuclear-fuel tax.
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.