EON's first-half sales up 23% from year earlier

EON, GERMANY'S biggest utility, said first-half sales rose 23 per cent from a year earlier as revenue from power and gas trading increased.

Revenue for the first six months of the year was €65.4 billion, the company said yesterday, beating some analyst estimates.

EON's trading business played a "significant" part in boosting sales allowing the utility to maximise the contribution of power stations and reflecting a new gas-hedging strategy.

"Our solid first-half results demonstrate that we're meeting our existing challenges decisively," ceo Johannes Teyssen said.

EON dropped 0.9 per cent to close at €17.65 in Frankfurt trading. OAO Gazprom, Russia's gas-export monopoly, agreed to amend long-term supply deals for EON last month after the utility lost hundreds of millions of euro on contracts linked to oil prices. The accord was backdated to the fourth quarter of 2010.

The renegotiation of all the company's oil-indexed gas contracts added €1.2 billion to EON's half-year profit compared with one year earlier, according to the firm's statement.

"EON is certainly doing better than RWE in the first half because RWE hasn't already reached a renegotiation of contracts with Gazprom," Matthias Heck, an analyst with Macquarie Capital Europe, said. The absence of €1.5 billion in one-time costs related to Germany's nuclear phaseout a year earlier also boosted results, he said. EON has pursued a €15 billion asset-sales program, job cuts and expansion abroad after the Fukushima disaster in Japan prompted Chancellor Angela Merkel to call for the permanent halt of all atomic plants by 2022.

The first phase of shutdowns trimmed earnings by €2.5 billion in 2011. As Germany takes reactors off line, it's pledged to meet power demand with more fossil-fuel-fired plants and alternative energy.

EON is raising investments in renewable-power generation and wants to expand in India and Turkey. The company's net debt widened by 22 per cent to €41.1 billion, as of June 30th, from a year earlier. That's higher than expected by Heck, who said more than €5 billion of the increase will be offset in the second half. - (Bloomberg)