Following the release of E.ON SE’s first half 2019 results, Mohit Prasad, project manager at data and analytics company GlobalData, offers his view: “E.ON SE has reported a steep fall in its adjusted Earnings Before Interest and Taxes (EBIT) by 12% at the end of the first half of 2019 compared to last year’s figures. The company reported earnings of €1.7m against €1.9m at the end of H1, 2019 on year on year basis.

“The decline in earnings at the customer solutions business is largely attributed to the challenging regulatory environment in the UK market. UK earnings were considerably lower, principally because of a new regulatory cap that squeezed the margins. The company also lost about 400,000 customers in Britain during the first half of the year, leading to a 65% drop in profits.

“However, the renewables and non-core business segment witnessed a marginal increase in their EBIT during the first half of 2019. The renewable segment performance improved due to the increase in generation output from the commissioning of Rampion offshore wind farm in April 2018 and Stella onshore wind farm in December 2018. The non-core business provided the profitable impetus through a considerable increase in hydropower generation.

“With the UK aiming to phase out all its coal-fired plants by 2025, the “Big Six” (British Gas, EDF Energy, E.ON SE, npower, Scottish Power and SSE), which currently holds more than 70% of the domestic supply market, have already started realigning their generation fleet by making announcements on the planned closure of their coal-fired plants and replacing them with either gas based or renewable energy projects.

“E.ON SE has 870.6 MW of pipeline capacity in the UK with more than 90% of it planned as renewable energy installations. In Sweden, the company has a pipeline of 338.8 MW that could stand to benefit from the increase in power tariffs in the country.

“The onshore and offshore capacity additions in Germany, the purchase of production volumes from PreussenElektra, the strong project pipeline in the UK and the income from Enerjisa Üretim should improve the EBIT for the company in the second half of the year. However, utilities in the UK may face more challenges following the British regulator, Ofgem, lowering the price caps due to a drop in wholesale power and gas prices this October.”