E.ON Core Energy Business Delivers With Higher Earning Figures

Eon, the German utility group buying Powergen of the UK, yesterday reported stronger than expected first quarter profits due to a sharp rise in earnings from its core energy business. The Powergen deal, that was announced last year, has set Eon on a strategy of focusing on energy and divesting its more diverse industrial interests. The improved first quarter results appeared to show merits of this but were tarnished by speculation that the group's bid to gain control of Ruhrgas, Germany's largest gas distributor, would be blocked on competition grounds. Net income for the first quarter rose from E725m ($661.7m) last time to E3.21bn while internal operating profit - the group's measure of operating profit plus net interest income, rose from E884m to E1.29bn. Analysts' forecasts for internal operating profit had ranged between E844m and E1.16bn. Internal operating profit in the energy division rose by eighty nine percent from E532m last time to E1bn due to better cost management, improved power prices in Germany and the full inclusion for the first time of results from the Sydkraft and Heingas operations. Internal operating profit from the chemicals, logistics and oil businesses fell but real estate internal operating profits rose 63 per cent to E39m. The group said that earnings growth was expected to be slower in the rest of the year but was likely to “significantly exceed” 2001 net income overall due to further merger synergies and continuing improvements in power prices. Powergen's ownership of LG&E, the Kentucky based power group, means Eon has to sell many of its diversified interests. US regulations bar groups that generate less than eighty per cent of their sales from electricity and gas supply from owning US energy companies. Eon has initiated an auction process for Stinnes, its transport and chemicals unit, and invited potential buyers to examine Stinnes' accounts and place offers. It is also attempting to swap some of its 65 per cent stake in Degussa, the world's largest chemicals company, for an additional holding in Ruhrgas and to sell Viterra, its real estate company. Germany's cartel office in January blocked an attempt by Eon to acquire BP's 25 per cent stake in Ruhrgas but the company applied for the economics ministry to overturn the ruling. As part of the process, the monopoly commission is set to make a recommendation on the acquisition this month before a public hearing on the case and a decision by the economics ministry in July. Erhard Schipporeit, Eon's chief financial officer, told analysts that the group did not expect a positive recommendation from the monopoly commission but was confident it could win over the economics ministry.

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