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Business

Eon logs record loss on fossil fuels writedown

The German energy giant has reported another huge loss, as it was forced to writedown the value of its conventional power plants which it has spun off in hopes to better cope with the country's switch to renewables.

Germany's second largest energy company on Wednesday unveiled a loss of 16 billion euros ($17 billion) in 2016, hit by a massive charge to the tune of 11 billion euros on its new subsidiary Uniper. Already in the previous year, Eon had run up a loss of almost seven billion euros.

Uniper combines Eon's former coal and gas power plants, which were spun off in 2015 under efforts to separate the company's loss-making fossil fuels operations from its healthier units, including gas and electricity networks, its own renewable generators, and customer service.

Eon said proof that its strategy was working was an underlying profit of 3.1 billion euros - excluding such special items and showing its core business was "robust."

"The impact on our balance sheet marks a turning point and clears Eon's way into the new energy world," chief executive Johannes Teyssen said in a statement.

Looking ahead to 2017, the group aims to make a net profit of between 1.2 billion and 1.45 billion euros, adjusted for special items. In a display of confidence, Eon executives will also offer a dividend of 0.21 euros per share for 2016, and promise to increase the payout to 0.30 euros for this year.

Suffering industry

Like other European competitors, Eon has suffered in recent years from low wholesale electricity prices, competition from subsidized renewable energy, and the German government's decision to ditch nuclear power by 2022.

Its German rival RWE on Tuesday also reported a massive loss - 5.7 billion euros in the red - hit by similar writedowns on gas and coal assets. The group's performance was further dented by what it called an "additional extraordinary burden" coming from new German legislation that forces energy firms to help pay for the country's nuclear phase-out.

"The difficult market environment made impairments necessary. In addition, the nuclear energy fund imposed a substantial one-off burden on us," chief executive Rolf Martin Schmitz said.

The German government, under Chancellor Angela Merkel, decided to move away from nuclear power by 2022 in the wake of the 2011 Fukushima disaster.

As part of the phase-out, Germany's four biggest energy providers RWE, Eon, Vattenfall and EnBW have to contribute 23.5 billion euros to a state fund for the long-term storage of nuclear waste.

RWE said it will pay about 6.8 billion euros towards the government fund - 1.8 billion euros of which has already been set aside in its 2016 results.

The affected firms have long complained about the high price tag that comes with Germany's atomic power exit, but critics counter that they benefitted from massive state subsidies when the nuclear plants first went into operation.

Watch video 01:18

RWE announces surprise losses

uhe/kd (Reuters, AFP, dpa)

 

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